U.S. President Donald Trump has imposed significant tariffs on cross-border auto trade, targeting both finished vehicles and parts. A 25 per cent duty will be applied to all imported finished vehicles into the United States starting on April 3, with the possibility of extending to include parts in the future. This move has raised concerns for many Canadians employed in the auto sector, which is the largest manufacturing industry in Canada and the second-largest source of exports to the U.S. after oil.
Trump’s primary aim is evident – to pressure companies exporting to the U.S. to relocate their production lines there by making it economically challenging for them. This marks the end of decades-long Canada-U.S. free trade in automobiles and introduces higher U.S. tariffs compared to those in place before the 1965 Auto Pact.
The impact of these tariffs on Canada’s auto industry, the most profitable manufactured product exported by Canada, could surpass previous trade threats from Trump such as tariffs on energy, steel, and aluminum. The full extent of the tariffs is still unclear, with uncertainties surrounding which component parts will be penalized. Cars exported under the Canada-United States-Mexico Agreement (CUSMA) might face tariffs on non-American components pending a review.
Canadian federal leaders have strongly opposed the tariffs, with Liberal Leader Mark Carney considering retaliatory measures and denouncing Trump’s actions as a breach of the trade agreement. Conservative Leader Pierre Poilievre criticized Trump’s trade war, emphasizing the negative impact on both countries. NDP Leader Jagmeet Singh labeled Trump’s move as a direct assault on autoworkers and called for a robust response to protect them.
Experts warn that Trump’s tariffs could disrupt the North American auto industry without providing substantial benefits, as building new assembly plants takes time, and supply chains cannot be established overnight. The uncertainty created by the evolving tariff threats is causing concern among investors in both Canada and the U.S.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, highlighted the paralyzing effect of the ongoing tariff uncertainty on the industry. Canada’s unique trade relationship with the U.S., where it imports more cars and parts than it exports, adds complexity to the situation. This aggressive stance on trade protectionism by the Trump administration aims to redirect production to the U.S. and could have far-reaching implications for the auto sector and trade relations between the two countries.
