International Trade Committee on Oct. 23rd, 2025

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

Welcome to meeting number eight of the Standing Committee on International Trade.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Thursday, September 18, the committee is resuming its study of Canada and the forthcoming CUSMA review.

We have with us today, as an individual, Joshua Meltzer, senior fellow, by video conference. From the Canadian Automobile Dealers Association, we have Tim Reuss, president and chief executive officer, and Huw Williams, national spokesperson—both people the committee has seen before. From the Mississauga Board of Trade, we have Trevor McPherson, president and chief executive officer.

Welcome to all of you today.

We will start with opening remarks, followed by rounds of questions. You each have up to five minutes.

Mr. Meltzer, I invite you to go forward. We'll give you the first five minutes.

[Joshua Meltzer, Senior Fellow, As an Individual]

It's a pleasure. Thank you. It's great to be here. I'm sorry I couldn't be there in person.

I'm Joshua Meltzer, a senior fellow at the Brookings Institution in Washington, D.C., and a leader of the USMCA initiative.

My testimony today focuses on the issue of China's circumvention of U.S. trade and investment restrictions by entering the U.S. market via Canada. Chinese circumvention can also happen via Mexico, but today I will focus on Canada.

The issue of Chinese circumvention has already become an issue in U.S.-Canada trade relations, and Canada has taken steps to address the issue, acknowledging that it is happening or seeking to prevent it from happening. Finding a more comprehensive approach to addressing Chinese circumvention will be a critical part of a successful USMCA joint review.

The incentive for circumvention is straightforward. It is created by U.S. tariffs on Chinese imports being higher than the same Canadian tariffs on Chinese imports. Since 2018, the U.S. has been raising tariffs on Chinese imports and further restricting Chinese investment in the U.S. At the end of 2024, the average U.S. tariff on Chinese imports was 11%, the tariff faced by Canadian products that were USMCA-compliant was 0%, and the U.S. average WTO MFN was around 0.15%. These tariff differentials already created incentives for Chinese products to circumvent U.S. tariffs via Canada, and the incentive for circumvention has grown. Today, the U.S. trade-weighted tariff on Chinese imports is 43%, and the trade-weighted U.S. tariff on Canadian imports is around 10%.

The net result is that the incentive for Chinese circumvention will persist with respect to Canada, and in the event of better outcomes from the USMCA review, where U.S. tariffs on Canadian imports are lowered, the incentive for circumvention will only increase. The incentive for circumvention will also result in goods entering Canada from China via third countries, often in Southeast Asia. As a result, addressing the challenge of circumvention may not be limited to tariff rates on imports from China alone.

Before proceeding, I want to quickly define what I mean by circumvention, which encompasses three ways Chinese products can enter the Canadian market.

One way is transshipment, which occurs when an import from China passes through Canada on its way to the U.S. without any substantial transformation that would allow it to be classified as being made in Canada. A second way Chinese products can circumvent tariffs is by being incorporated into manufacturing and other processes in Canada—effectively an input into supply chains—to produce a good that is then exported to the U.S. A third way is Chinese direct investment in Canada that produces products for export to the U.S.

Chinese goods transshipped by Canada into the U.S. that do not undergo sufficient transformation required to qualify under USMCA yet claim the lower USMCA tariff, or are classified as made in Canada and then claim the lower U.S. MFN rate, are inconsistent with Canada's trade obligations. However, the other opportunities for China's circumvention by supply chains and investment are often not a matter of legality. Instead, the concern with circumvention via these other pathways reflects changed political tolerance in the U.S. for ongoing exposure to trade with China.

How to better address the incentives for circumvention created by U.S. tariffs on China is often less about better enforcement of existing trade rules than it is about requiring new approaches.

Canada has taken a range of steps to address Chinese circumvention, as mentioned, including a 100% surtax on Chinese-made EVs and the 25% surtax on imports of steel and aluminum products from China. These actions align with U.S. trade restrictions on Chinese EVs and tariffs on steel and aluminum from China.

The central policy choice for Canada will be the extent to which it is asked to replicate the U.S. tariff and investment screening regimes with respect to imports and investment from China, and possibly other countries as well. Failure to address U.S. concerns about circumvention risks a successful USMCA review and could lead to ongoing, or even higher, U.S. restrictions on trade with Canada.

While the policy solution is easy to state, determining the extent to which Canada should align with the U.S. on its China tariffs and investment restrictions will be challenging, particularly given the extent and size of the U.S. tariffs. In addition, current uncertainty surrounding U.S. policy toward China when it comes to trade also cautions against hastily expanding Canadian tariffs on Chinese imports.

As Canada considers calls for alignment, it should also assess what other commitments from the U.S. Canada would need that reflect the underlying implication that Canada would be tying its trade policy more closely to that of the U.S.

In order to better assess these concerns, the following pulls from a report that I co-authored with Maricarmen and that was published recently. It analyzes the extent to which we are seeing circumvention in the trade data. We could share a copy of this report with the committee. It is available online at the Brookings USMCA initiative.

[The Chair, Liberal, Judy Sgro]

Mr. Meltzer, your five minutes are up, sir. If you could just—

[Joshua Meltzer]

I'm happy to finish there. That's fine.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Reuss, go ahead, please.

[Tim Reuss, President and Chief Executive Officer, Canadian Automobile Dealers Association]

Thank you, Madam Chair, and thank you, dear members.

The Canadian Automobile Dealers Association represents 3,400 franchised car and truck dealers across Canada. Collectively, they directly employ 178,000 people, contribute $28 billion to Canada's GDP and pay over $6 billion in federal, provincial and municipal taxes. This year our members will sell over 1.9 million new vehicles and 1.2 million used vehicles, and will write over 31 million service and repair orders.

I want to thank you for inviting us to testify today, as the Canadian automotive industry is in the middle of one of its biggest and most complex challenges. The intricate supply and trading framework that is the foundation of our business is in turmoil due to the changed approach by the current U.S. administration. During the course of these hearings, you will have heard from manufacturers, labour unions and suppliers in our industry who collectively design, engineer, source and build vehicles. We are here to convey the opinions and points of view of the consumers.

Our members are independent entrepreneurs in every rural, suburban and metropolitan community in Canada. A lot of you know the dealers in your respective ridings. Our members are intimately involved in providing the right mobility solutions that fit the very divergent needs of each individual customer—finding the right size of vehicle or the appropriate trim level and drivetrain, or working with financial institutions to facilitate payment options that fit their budgets.

We can tell you that the number one concern consumers have is affordability: Can I, or will I, be able to afford the vehicle I want or need for my transportation? Let me give you some numbers to underline what consumers currently face. According to the most recent automotive trends report from Deloitte, 67% of Canadians expect to pay less than $500 a month for their vehicles. The average monthly payments are currently at $770 for a lease and $880 for loans. This is only starting to get worse as the full cost impact of the tariff and trade upheaval works its way through the different supply chains.

As you discuss the intricacies of formulating an adjusted industrial and public policy to cope with the changed international landscape, we urge you to not lose sight of our own homegrown issues, in particular the additional affordability pressures caused by the EV mandate. When the electric vehicle availability standard was introduced, the federal government made a number of statements and commitments specifically related to affordability that are not valid anymore. They said, “consumer purchases of ZEVs will be supported by $2 billion invested by the Government of Canada in the Incentive for Zero Emissions Vehicle Program”. That support was initially paused and has now been officially cancelled. The mandated targets were improbable to begin with, due to weak consumer demand, technology limitations across vehicle segments and use cases, as well as infrastructure shortfalls. Removing the purchase incentives moved those targets from improbable to impossible.

The federal government's most recent decision to pause the 2026 targets was a very good first step. Now is the time to take the next one and remove these unnecessary targets altogether. You already have greenhouse emission reduction targets in place that will achieve the original intent of reducing emissions without dictating to industry and consumers what technology to produce and buy.

While we're talking about unnecessary and inefficient regulation, let's not forget about the so-called luxury tax. I say “so-called” because, as mentioned earlier, vehicles are getting substantially more expensive. It is not uncommon for fully equipped work trucks to hit this particular tax threshold. This so-called luxury tax is a very inefficient tax. It costs more to administer the separate system of reporting and auditing that was set up for it than it generates in revenue.

These are all competitive disadvantages our businesses face before we even come to the larger global topics being discussed. Let's make sure we have our own house in order.

When it comes to the impending renegotiation of CUSMA, we urge you to consider the deeply integrated nature of our supply chain and businesses when thinking about how to act or react to the most recent developments out of the United States.

The way I put it to a federal minister recently is that our main trading partner has just shot us in the foot. Taking out a gun and shooting ourselves in the other foot might not be a winning strategy. By that, we mean that imposing retaliatory tariffs will not help with the affordability crisis—quite the contrary.

Additionally, we would encourage the government to continue along the path of diversifying Canada's economy away from an over-dependence on the United States. For our industry, we have recommended that Canada consider expanding its automotive regulatory framework, particularly concerning safety and emissions standards, to accept vehicles that have been deemed safe and environmentally compliant in other jurisdictions with which Canada has a free trade agreement, specifically the European Union, South Korea and Japan.

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Reuss.

Mr. McPherson, please, you have up to five minutes.

[Trevor McPherson, President and Chief Executive Officer, Mississauga Board of Trade]

Thank you very much, Chair Sgro.

Thank you to all committee members for the opportunity to address this very important standing committee of Parliament, especially at this critical moment for our economy and the business community.

I’d also like to give a quick shout-out to the member for Mississauga South, MP Peter Fonseca.

I hope my comments can be helpful to the committee. I will note that we work closely with our colleagues at the Canadian Chamber of Commerce, which of course serves as our chamber network's lead on this file.

As president and CEO of the Mississauga Board of Trade, I lead an organization that represents businesses in a variety of industries, including life sciences, aerospace, post-secondary education, food and beverage, transportation and logistics, information technology and advanced manufacturing. Really, that's a sampling of many of Canada's most prominent industries. Mississauga is often seen as a suburb of Toronto, and we are proud of our deep relationship with Toronto and our position in the GTA—in particular, as home to the Toronto Pearson International Airport.

I need to highlight that there are some unique aspects of the city of Mississauga that make it stand out, though, especially in the current tariff war. The city’s population represents 5% of the province of Ontario’s population and 7% of its economic output. More people commute into Mississauga than leave it daily. The city’s economy has undoubtedly been impacted by the trade war and the loss of efficient access to the U.S. market, or at least the threat thereof. Mississauga’s unemployment rate rose from 7.3% in 2023 to 9.8% in Q1 of this year. Industries that are heavily connected to Canada-U.S. trade, such as food and beverage or transportation and logistics, have been especially hurt.

At the same time, Mississauga's economy is diverse. We are fortunate to be home to a number of multinational Canadian headquarters, such as Mitsubishi Heavy Industries on the aerospace side and many global life sciences companies that continue to be resilient, make investments and add key roles to their Canadian workforce. These are companies like AstraZeneca, with its $820-million investment earlier this year to expand its R and D facilities and move to a new, larger corporate headquarters, and Roche Canada, which made new commitments in the area of AI with its new global informatics hub, creating 250 jobs. In short, the CUSMA review as it pertains to life sciences in particular—and any related tariff or regulatory policies—is an area of great importance to our members in this sector, both large and small.

I mentioned a couple of large entities, but the same holds true for our SME innovators. I'll acknowledge that this is Small Business Week in Canada, and we were fortunate to host Minister Valdez and our provincial small business minister this morning to talk about how we can support our small businesses at this time.

Microbix is another highly innovative company. It produces cutting-edge biological and technical infectious disease diagnostic solutions and vial-filling solutions for the global industry. There's also Seaford Pharmaceuticals, which develops niche products in therapeutic areas. Other members more directly impacted by tariffs would be companies like Mississauga's High Strength Plates and Profiles, which is dealing with the impacts of current steel tariffs imposed by the U.S. Just this morning, I spoke with one of our newest members, a small business called Corpex. They provide end-to-end industry 4.0 and AI solutions, with custom-built machine-vision solutions for the manufacturing sector. This company is also impacted by the current copper and aluminum tariffs that go on the cabling used in their applications.

At the moment, we're playing defence on many levels. We're trying to hold on to what we have, certainly, but there are still areas of promising growth. We at MBOT are working to support our members with evolving market and supply chain diversification strategies. At MBOT, we have always tried our best to make the case for preserving the Canada-U.S. relationship. We've consulted with chambers and other business groups in the U.S. where our members are doing business.

We would prioritize three things with the Canadian chamber.

Prioritize the continuity of CUSMA not with one-year reviews but with something more permanent. Certainty is so important for business.

Implement targeted measures to strengthen the agreement. There are opportunities to strengthen the agreement. The North American competitiveness committee exists within the agreement. We think there's opportunity to expand upon this and find alignment across all three nations in areas such as automotive, aerospace and defence, life sciences, energy and advanced manufacturing.

We also need to strengthen North America's economic integration by reducing or eliminating tariffs against each other. We already have side letters that shield Canada and Mexico from certain unilateral trade actions. We should look at whether there are other opportunities to protect Canada and Mexico from these potential unilateral actions. There's an opportunity here to look at ways we can all be stronger together. I think that's the goal.

These points are particularly relevant in Mississauga, given our strong integration with global and domestic supply chains. We have the Pearson economic zone, employing 500,000 people. It's responsible for 6.3% of Ontario's GDP and $42 billion in economic output.

Whether it's with regard to Mississauga's transportation and logistics industry or other sectors, it's certainty that drives investment. This should be an underlying theme in the CUSMA negotiations. Certainty drives investment on both sides of the border.

I realize I'm at time. I look forward to the committee's questions and discussing how we can support the relationship going forward.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. McPherson.

We'll go to Mr. Chambers, please, for six minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Madam Chair.

Welcome to our witnesses.

Mr. Williams, it's nice to see you again. Mr. Reuss, thank you for coming.

If I heard correctly, you represent 3,400 dealers across the country. Is that for all the manufacturers, or is there a group that is not included in that?

[Tim Reuss]

That's correct.

We represent all manufacturers and all brands with the exception of those that have what I'll call a direct-to-consumer business model, which is Tesla. All other brands that deal with a dealer network are represented by us, be they North American, Korean or Japanese.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay.

Just so I'm clear, Tesla doesn't have any manufacturing in Canada, does it?

[Tim Reuss]

Not to my knowledge, no.

[Adam Chambers, Conservative, Simcoe North, ON]

That's fine.

Go ahead.

[Huw Williams, National Spokesperson, Canadian Automobile Dealers Association]

Mr. Chambers, if I may add an editorial comment about Tesla, I spend a lot of time on television talking about how they're a subsidy company and how they get a subsidy on both ends of the equation. They get a sales subsidy when they buy vehicles from here, and they also get a subsidy from the other manufacturers for projected sales in the EV market.

[Adam Chambers, Conservative, Simcoe North, ON]

Would it surprise you to learn that the subsidy they're getting from the other manufacturers has been in the hundreds of millions of dollars already?

[Huw Williams]

It doesn't surprise me at all. I'm aware of those numbers, but I think it would surprise the average taxpayer that this scheme has been developed and Tesla's taking advantage of it. It's not helping small businesses in your riding or dealers in your riding. Tesla has been a subsidized competitor.

[Adam Chambers, Conservative, Simcoe North, ON]

Elbows up.

You don't have to comment there.

Your position on electric vehicles and the mandate hasn't really evolved that much. You've been warning the government for some time that it's been challenging. Is that correct?

[Tim Reuss]

That is correct. However, we'd like to differentiate between our opinion on electric vehicles and our opinion on the electric vehicle mandate.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay.

[Tim Reuss]

We are very much for electric vehicles. Electric vehicles are currently a big part of the market solution and will be a growing part of the market solution, but they're not the only technological solution. This is the critical difference.

Our members are selling and servicing electric vehicles as much as they are internal combustion engines, although not as much percentage-wise. They're very much committed and have invested millions of dollars in the expectation of being able to sell and service more.

To give you one concrete example and get into the weeds, a rural dealer in Alberta, Sherwood Ford, made an $800,000 investment in electric vehicles, meaning charging stations, special tools, lifts, a forklift to be able to take a battery out of a vehicle and things of that nature, plus training, etc. This year, they sold seven vehicles. You can see how that investment doesn't necessarily pencil, but he's committed, as are all of our members, to the path to electrification.

We're not against electric vehicles We're against the electric vehicle mandate.

[Adam Chambers, Conservative, Simcoe North, ON]

Obviously, you favour the recent pause, but you would go further. Do I understand correctly?

[Tim Reuss]

That is correct. We would say that now is the right time to repeal it and look at other solutions, if they're even necessary.

We don't think an additional solution is necessary. There's already a greenhouse gas emissions system in place that obligates the manufacturers to continuously keep lowering emissions, but it doesn't prescribe the technology to get there. Whether you get there by a combination of electric vehicles and internal combustion engines with hydrogen, hybrids, plug-in hybrids or others—pedalled cars—whatever solution you come up with, you let the market and technology decide.

[Adam Chambers, Conservative, Simcoe North, ON]

In your view, the only way the electric vehicle mandate would work is if the government continued to subsidize the purchase of the vehicles as well. Is that also correct?

[Tim Reuss]

We don't think any type of EV mandate works, because it's prescribing a technology instead of an outcome. The outcome's already prescribed, again, with the existing greenhouse gas emissions regulations. There is no need to layer something on top of it.

We're all in agreement with the outcome that we want to achieve, which is to reduce emissions and have a better and safer world for everybody—absolutely. Everybody agrees with the outcome. It's just the tools being chosen to get there that we disagree with.