Biden has pledged tax credits for electric vehicles. Here’s what that means for Canada

WATCH: State of the Union 2022: Joe Biden addresses joint session of Congress | FULL

Despite the protectionist drumbeat that provided the rhythm of Joe Biden‘s first state of the union speech, it was what the U.S. president didn’t say Tuesday about electric vehicles that has some in Canada breathing a little more easily.

Make no mistake, the “made in America” mantra — a calling card for the commander-in-chief that has been sending chills up Canadian spines ever since he moved into the White House last January — was a fixture of the hour-long speech.

“One way to fight inflation is to drive down wages and make Americans poorer. I have a better plan to fight inflation — lower your costs, not your wages,” Biden said, an appeal to moderate Democrats who fear the risk of higher prices from government spending.

Story continues below advertisement

“Make more cars and semiconductors in America. More infrastructure and innovation in America. More goods moving faster and cheaper in America … And instead of relying on foreign supply chains, let’s make it in America.”

But the political language seemed to give way to pragmatism when Biden briefly reprised the idea of using tax credits to get Americans to buy more EVs, a strategy whose original form placed the richest incentives on vehicles assembled in the U.S. with union labour.

“Let’s provide investments and tax credits to … lower the price of electric vehicles, saving you another $80 a month because you’ll never have to pay at the gas pump again.”

Click to play video: 'Canada threatens new tariffs on US exports if electric vehicle tax credit approved'
Canada threatens new tariffs on US exports if electric vehicle tax credit approved

Foreign automakers, as well as non-unionized U.S. EV giant Tesla, were harsh critics of Biden’s original plan, one small component of an ill-fated $2-trillion suite of social spending and climate programs known as the Build Back Better bill.

Story continues below advertisement

So too were moderate Democrat lawmakers like West Virginia Sen. Joe Manchin, whose state is a major manufacturing sector for Toyota, and Sen. Kyrsten Sinema from Arizona, a southern border state with expansive ambitions in the EV sector.

But the proposal triggered the deepest tremors in Canada, where stakeholders, economists and the federal Liberal government all framed Biden’s proposal as an existential threat to the auto sector north of the border.

Financial news and insights delivered to your email every Saturday.

Talk of the scheme dominated Prime Minister Justin Trudeau’s agenda last November, when he sat down with Biden to discuss Canada’s concerns during a visit to the White House as part of the North American Leaders’ Summit.

Manchin — a vital Democratic vote in the 50-50 Senate — effectively killed Build Back Better just before Christmas, publicly declaring he would vote against it for fear that it would exacerbate already-soaring inflation in the U.S.

Critics of the EV tax credits refused to declare victory, however, knowing the proposal was far from dead. Many maintained that posture Wednesday, acknowledging Biden’s framing as a step in the right direction, albeit a small one.

Click to play video: 'The Big Shift: Is Canada ready for the EV revolution?'
The Big Shift: Is Canada ready for the EV revolution?

Biden’s language may signal plans to revisit the original proposal, said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, who has been back and forth to D.C. for months as part of Canada’s ongoing lobbying efforts.

Story continues below advertisement

“Will the potential reset be an opportunity for President Biden to accede to Justin Trudeau’s requests to include Canada? Here’s his chance,” Volpe said.

But if there’s any reason to be truly optimistic, he added, it’s because the international crisis triggered by Russian President Vladimir Putin’s invasion of Ukraine has helped drive home the value for the U.S. of working with international partners.

“I’m less pessimistic,” Volpe said, “because harder world events are showing U.S. lawmakers that they have bigger problems that will require more thoughtful investment approaches with geopolitical allies.”

Innovation Minister François-Philippe Champagne, speaking before Wednesday’s weekly caucus meeting, reacted to Biden’s Buy American language by striking a similar tone — a signal, perhaps, of how serious global challenges could be informing a pragmatic new approach to Canada-U.S. relations.

“Canada is a beacon of stability, predictability and the rule of law, and I would say, if you look at world events, it’s in short supply and high demand,” Champagne said.

Click to play video: 'Experts urge better infrastructure needed for electric vehicles'
Experts urge better infrastructure needed for electric vehicles

Federal officials have been working hard for months to remind the U.S. that Canada is and remains a trusted and reliable ally, he added — a message that has fresh resonance in the context of the current geopolitical landscape.

Story continues below advertisement

“That’s really the mood around the world now, how we do that with a trusted partner,” Champagne said.

“Yes, I listened to the president. But on the other hand, I would say to everyone watching that Canada certainly needs to be part of the equation, and I would certainly say that to our U.S. friends.”


Sponsored content