U.S. President Donald Trump hasn’t imposed any tariffs on Canada yet, but he’s already dealt a potentially devastating blow to Ontario Premier Doug Ford’s signature industrial policy.
Ford has heavily touted his plan to make the province a major player in the electric-vehicle industry, especially in the production of batteries. Ontario has promised billions of dollars in government support to make it happen. With the stroke of a pen this week, Trump undermined that plan, perhaps fatally.
As in Canada, the American EV market is largely driven by government rules and incentives. Trump gutted those. He ended mandatory sales quotas for EVs, cancelled a US$7,500 tax credit for buyers, froze federal money for a charger installation program, and abandoned the previous administration’s generous financial support for EV plants. That would be the same support plan that Ontario and the federal government had to match to get automakers to build battery plants here.
Trump also pulled out of the Paris climate pact, cancelling the agreement that drove all the targets and incentives.
With 90 per cent of Ontario’s auto production going to the U.S., what happens in that market is vital to the Ontario industry’s success. Ford has placed a big bet on increasing American demand for EVs, but Trump’s moves are likely to thwart that.
Even with all the incentives provided by state governments and the recent Joe Biden administration, EV sales in the U.S. still hovered around eight per cent of total sales in 2024. That’s a small piece of the market and it’s likely to get smaller without all the government rules and inducements.
Most manufacturers of EVs are caught in a Catch-22 situation. They need higher EV sales volume to take advantage of economies of scale, bring down prices and make a profit. So far, only Tesla has achieved that, accounting for 44 per cent of EV sales in the final quarter of 2024. GM was second at just 12.6 per cent and everyone else was in single digits.
If the American EV market is stalled at best, so is Ontario’s plan to meet imagined massive new demand for electric-car batteries.
It’s bleak news for Ontario and because the damage is not tariff-related, there is really nothing to negotiate. Trump has chosen the interests of the American oil industry over those of the auto industry, even though the auto industry has spent billions tooling up for EVs. Nothing Ford does will deter the president from that.
There is some suggestion that Trump might have exceeded his powers with some of the EV changes he mandated this week. Perhaps they will be stopped in court or Congress, years from now, but no matter what, the EV industry is in for prolonged uncertainty.
That’s not Ford’s only auto-sector problem. The threat of 25-per-cent tariffs would undermine Ontario’s non-EV parts and manufacturing sector. The auto industry produces 100,000 jobs and contributes $14.9 billion to the provincial economy.
Ontario’s EV plan was an expensive attempt to boost those numbers. A report from federal Parliamentary Budget Officer Yves Giroux last year estimated that the federal government had promised $31.4 billion for EV supply-chain projects, with provincial governments funding $21.1 billion, most of that from Ontario. The Ford government says the figure is high, but won’t provide an alternative one. Let’s just say it’s a lot.
The good news, to the extent that there is any, is that some of the money is tied to the volume of battery production, so it won’t be a total loss if the plants don’t prosper. Some of the provincial money is also contingent on big American incentives staying in place. That could let Ontario reduce support. But if Trump brings in tariffs, Ontario can expect to see investment flowing to the U.S.
For Ford, Trump’s attack on the EV industry casts a dark shadow on the industrial plan the premier has spent a lot of time promoting, even though not much construction is complete and the mining component is lagging behind.
Ontario’s EV adventure ought to be a lesson in government overreach. The whole thing rested on governments continuing to pretend that they could compel people to buy electric cars, whether they wanted to or not. Consumer demand was to be replaced with politicians’ preferences. It was wildly unrealistic from the outset.
Because of that, it wouldn’t have taken an abundance of foresight to determine that Ontario’s EV plan was a high-risk play. It was always vulnerable to a change in American government, and Trump was a known threat. Now the predictable has happened, compounding any damage that Trump’s tariffs might do. In hockey terms, this was putting one in your own net.
National Post
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