How will tariffs affect Quebec's massive investment in the battery industry?

How would a potential tariff and trade war affect Quebec's place in the electric vehicle battery production industry?

According to McGill University engineering professor Jinhyuk Lee, Quebec has an "excellent opportunity" to dominate the upstream (i.e. mining) development of certain batteries as well as the manufacturing of the products.

However, Lee believes that the province needs to focus on the high-end nickel-manganese-cobalt (Ni-Mn-Co) batteries, as opposed to the more common and lower-priced lithium-ion-phosphate (Li-Fe-PO4) batteries, which China is a major player in developing.

"Tariffs inherently reduce the cost competitiveness of Canadian products across the battery value chain (battery minerals, battery active materials, battery cells, battery packs)," said Lee. "However, high-value segments require more expensive materials, an area where Canada and Quebec hold strong advantages due to abundant domestic resources."

Lee explained that Ni-Mn-Co batteries have a higher energy output, and thus, vehicles have a longer range. In addition, the nickel batteries take less time to charge than the lower-priced lithium-ion ones.

Northvolt produces lithium-ion and sodium-ion cells, in addition to lithium-metal cells, according to the company's site. 

Lee said that if Quebec corners the market on mining and producing nickel-manganese-cobalt (solid-state batteries), it would be able to compete better.

"By leveraging advanced technologies in developing high-value materials or batteries (such as Ni-Mn-Co or solid-state batteries) and combining this expertise with the low-cost and large-scale availability of critical minerals within Canada, Quebec can maintain its competitive edge in terms of both cost and quality of battery materials and batteries," said Lee.

Lee said that tariffs would naturally affect Quebec or Canada's ability to export raw materials or finished products to the U.S.

In addition, the lower-cost lithium-ion-phosphate batteries are made in China, and Lee said the low labour costs, government subsidies and vertical integration in the country have allowed manufacturers to produce these batteries cheaply.

"Consequently, even if significant tariffs are imposed on Chinese products entering the U.S. or North American markets, their products would likely remain more affordable and offer similar performance," he said. "This dynamic would make Canadian battery products less appealing and could lead to decreased profitability."