WASHINGTON — Canada is threatening to impose tariffs on U.S. exports, together with auto sector items, if Congress advances a proposal on electrical car tax credit that the Canadian authorities says poses a “important risk” to its automotive business.

In a letter despatched Friday to U.S. Senate management, Canadian Deputy Prime Minister Chrystia Freeland and Commerce Minister Mary Ng mentioned they’re “deeply involved” concerning the proposed EV tax credit within the Democrats’ Construct Again Higher Act.

“We wish to be clear that if there isn’t a passable decision to this matter, Canada will defend its nationwide pursuits, as we did once we had been confronted with unjustified tariffs on Canadian metal and aluminum,” they wrote within the letter.

“In that regard,” they continued, “Canada can have no alternative however to forcefully reply by launching a dispute settlement course of beneath the USMCA and making use of tariffs on American exports in a way that may impression American staff within the auto sector and a number of other different sectors of the U.S. economic system.”

The Canadian officers mentioned they’re getting ready to publish a listing of U.S. merchandise “within the coming days” that will face tariffs if there isn’t a “passable decision.” The tariffs would come with the auto sector, amongst different industries, the letter states.

“On the identical time, we intend to clarify which U.S. companies and staff can be impacted,” they wrote.

At challenge is a proposal championed by Michigan Sen. Debbie Stabenow and Rep. Dan Kildee that may increase shopper tax credit to as a lot as $12,500 for EVs assembled in a manufacturing facility represented by a labor union with U.S.-produced batteries. After 5 years, solely EVs assembled within the U.S. can be eligible for the proposal’s $7,500 base credit score.

The proposal is backed by President Joe Biden however faces potential roadblocks because the Senate takes up the huge social spending and local weather invoice.

Recipients of the letter embrace Majority Chief Chuck Schumer, Minority Chief Mitch McConnell and Sen. Joe Manchin, a Democrat from coal-producing West Virginia and a key swing vote who has known as the proposal’s $4,500 extra tax credit score for union-made EVs “fallacious” and “not American.”

American Honda, Tesla, Toyota, Volkswagen Group of America and different non-Detroit 3 automakers have fiercely opposed the proposed EV tax credit. Autos Drive America, which represents the U.S. operations of worldwide automakers, and the American Worldwide Vehicle Sellers Affiliation even have lobbied in opposition to it.

Canada and Mexico beforehand have warned U.S. lawmakers and the Biden administration that the proposed EV tax credit may violate commerce agreements and hurt the North American auto business.

Mexico earlier this month known as the proposal “discriminatory” and mentioned it was analyzing a spread of authorized actions, together with tariffs, Reuters reported.

On Monday, the European Union additionally raised “sturdy considerations” over the proposed EV tax credit.

In a letter despatched Dec. 3, Valdis Dombrovskis of the European Fee urged Senate lawmakers to take away “all components” of the EV tax credit score proposal that he says would discriminate in opposition to EVs imported from the EU in addition to EU firms and the American staff these firms make use of.

The Senate is dashing to complete the Construct Again Higher invoice earlier than the top of the 12 months.