Canada’s auto sector weighs ‘difficult’ new reality under Trump’s tariffs
It’s been about one week since the tariffs imposed by U.S. President Donald Trump on the North American auto sector took effect and those within the Canadian industry say so far, confusion is what’s most prominent.
The 25 per cent tariffs went into effect April 3, putting a duty on all foreign-made vehicles entering the U.S., though automakers compliant with the terms of the Canada-U.S.-Mexico Agreement (CUSMA) can deduct the value of U.S. content.
Canada also imposed its own duty of 25 per cent on U.S.-assembled vehicles, though it too will allow importers to deduct the value of Canadian and Mexican content under CUSMA.
“So what we’re seeing immediately in terms of reaction is companies are taking a moment to just try and understand what the lay of the land is, what exactly the rules are, and then figure out what the path forward is for future exports into the United States,” said Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers Association (CVMA).
“But it’s a very difficult environment to make decisions and, as a result, you’ll see some production slowdowns as people try and grapple with the implications of all of this.”
Slowdowns were seen the day the tariffs took effect, when Stellantis said it was temporarily laying off 900 workers at five U.S. facilities and temporarily pausing production at an assembly plant in Windsor, Ont., as well as in Mexico.
On Friday, General Motors also announced it was temporarily halting production of the BrightDrop electric delivery van at the CAMI Assembly Plant in Ingersoll, Ont.
The automaker says the stop is “directly” responding to market demand and rebalancing inventory. However, while the company says it’s not related to tariffs, the union representing CAMI workers pointed the finger at Trump’s rejection of electric vehicle technology as an impact on investment and the freezing of future orders.
Trump’s tariffs have posed a risk of big losses to many companies not only in Canada and Mexico, but the U.S. as well.
A study by the Michigan-based Center for Automotive Research found that the tariffs will increase costs by about US$108 billion for automakers in the country in 2025.
That includes Stellantis, General Motors and Ford, all three of which are members of the CVMA, which Kingston notes would see increased costs of US$42 billion. All three companies have plants that operate in Canada.
Kingston says while Trump’s goal with his tariffs appeared to focus on bringing manufacturing back to the U.S., he said it will more likely hurt that industry.
“It’s been sold as a way to boost manufacturing in the United States. The actual effect is it will make manufacturing in the U.S. extremely expensive,” he said.
“Therefore competitors in other parts of the world will actually be put at an advantage. Even if they face a 25 per cent tariff going into the U.S., they will not be exposed to this plethora of tariffs on all of the parts and components that go into building a vehicle.”
While there’s concern about impact, David Adams with the Global Automakers of Canada says there may be a “silver lining around the big, black cloud” for Canadian automakers.
“I think for Canadian-produced vehicles, we’re probably in a slightly better place because of the carve out that was provided by virtue of the USMCA agreement,” Adams said, referring to the ability to deduct the value of U.S. content.
Adams cautioned it doesn’t mean Canada is getting a pass, noting that there will still be an increase in consumer prices due to the tariffs, though he said it may be mitigated from bringing in vehicles from other countries.
He warned that Canada may not have seen the full impact of tariffs yet on automakers, however, noting that while Trump announced duties on automotive parts, they won’t take effect until May 3.
“I think that’s even more complex than the tariffs applied to vehicles when you’re trying to ascertain the American content of parts and parts of parts,” Adams said. “I don’t even think by May 3 they will have a system figured out to be able to reasonably calculate that amount.”
The one-week mark for Trump’s auto tariffs comes just two days after Trump paused his so-called “reciprocal” tariffs for 90 days on countries facing rates higher than his 10 per cent baseline.
Canada did not face an additional “reciprocal” tariff, but the White House has said that if the existing 25 per cent tariffs on Canadian goods is removed, the country will face a reciprocal tariff of 12 per cent.
Canada continues to face duties on automotive vehicles, steel and aluminum exports, and non-CUSMA-compliant goods.
Prime Minister Mark Carney, who retains his caretaker role during the federal campaign, spoke with Trump late last month. The pair agreed that negotiations with Trump would begin immediately after the election if his party were to form government.
But in the interim, Adams said automakers and workers are hoping a solution not involving tariffs will be found to deal with the challenges facing the industry.
“It’s keeping a lot of people up at night,” he said.
— With files from Reuters
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