The Canadian automaking industry warns incoming U.S. president Donald Trump’s plan to impose tariffs of 25 per cent on all imports from Canada threatens to devastate the sector across the continent and drive up costs for car buyers.
Makers of cars and auto parts in Canada are bracing for Monday’s inauguration of Mr. Trump, who has vowed to slap tariffs on Canada and Mexico unless they shore up border security to stop the flow of migrants and illegal drugs. Canadian leaders have said they are planning retaliatory tariffs against Mr. Trump’s move, which could cost thousands of jobs and send the country into an economic recession.
Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association (CVMA), which represents the three Detroit-based car makers, calls the threat of U.S. tariffs “extremely problematic.”
For decades, governments in Canada, the United States and Mexico have crafted free-trade agreements that allowed the auto industry to become fully integrated across borders. This means car components can cross the border several times – tariff free – before an automobile rolls off the assembly line to be taken to a dealer’s lot anywhere in North America, also tariff free.
“It’s so integrated that there is no such thing as an American-built vehicle. There’s no such thing as a Canadian-built vehicle. There’s no such thing as a Mexican-built vehicle,” Mr. Kingston said. “We build vehicles together.”
Vehicles are Canada’s second-most valuable export, worth $51-billion in 2023. About 93 per cent are sent to the United States, the CVMA says. Canadian plants made 1.5 million passenger vehicles in 2023, and employed 128,000 people manufacturing autos and parts.
The Trump tariffs would drive up car prices for U.S. consumers, reducing demand and North American auto production and the ability to compete with China, which is “flooding” global markets with electric vehicles, Mr. Kingston said.
“This tariff is a tax. It’s a tax on consumers. It’s a tax on business. It is so significant that it makes it very challenging to be competitive in North America,” he said. “These tariffs are so high that it would make it very hard to operate not just in Canada and Mexico, but in the United States because you simply don’t have a U.S.-based supply chain for all of these inputs.”
Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, agrees there are no alternative sources in the U.S. for many made-in-Canada auto parts, at least in the short term.
This will mean Stellantis’s Jeep factory in Ohio, which gets about 40 per cent of its parts from Canada, will quickly see input costs balloon with the new tariff, he said. Similarly, the Chrysler minivans made at Stellantis’s plant in Windsor and the Chevrolet pickup trucks made in Oshawa, Ont., will suddenly cost U.S. buyers 25 per cent more.
“It’s really hard to justify any long-term run of making those cars,” Mr. Volpe said. This is bad news for the constellation of parts makers that surround every auto assembly plant in Ontario and the U.S.
“It’s all hand in glove,” he said. “If I’m not making a car or if I’m making fewer cars, then I’m buying fewer seats or I’m buying no seats. And if you’re buying the seats from a factory in London, Ont., you do not have another seat factory ready to go in Kentucky.”
As the industry waits to see if Mr. Trump will follow through on his tariff threat, Canadian officials have been planning a list of U.S. goods on which to apply retaliatory tariffs.
This is a worry for Nova Bus, a Volvo Group-owned transit bus maker that employs 1,400 people near Montreal. The company’s plants are focused on Canada, says Christos Kritsidimas, vice-president of legal and public affairs, but rely on a global supply chain of parts to produce diesel, electric and hybrid buses. If these parts are hit by Canada’s retaliatory tariffs, the business will face higher costs.
“I can’t tell you how we would get impacted, but what we do know is that trade wars don’t benefit anyone,” Mr. Kritsidimas said.
