Trump threatens 50% tariffs on Canada-made vehicles and parts
US president Donald Trump has threatened that tariffs on Canadian-made cars, trucks, automotive parts and steel could be raised 50% from January 1 next year, following the collapse of trade talks.
Canadian prime minister Mark Carney and US president Donald Trump
Source: White House
Canadian-built vehicles currently face a 25% US tariff on their non-US content, while US content in USMCA-compliant vehicles remains exempt. Trump has not yet clarified whether that treatment would continue under the threatened 50% tariff from January. It is not clear whether USMCA-compliant goods, currently dutied only on their non-US content, will be affected.
The US and Canada had been re-engaging in trade talks, with Canada seeking to lower the current 25% tariffs on automotive imports to 15%, but the talks broke down with both parties blaming each other, and Trump imposed new 50% duties on about $20 billion worth of goods.
The escalating dispute also raises questions over future vehicle production allocations in Canada. Automotive tariffs were among the sticking points in the failed negotiations, including the treatment of larger pickups and medium- and heavy-duty vehicles. Ford is investing around $3 billion to produce F-Series Super Duty trucks at Oakville Assembly Complex in Ontario, while GM also produces Silverado pickups in the country.
According to GlobalData, vehicles produced in Canada accounted for 5.4% (861,000) of total sales in the US last year.
In response to the tariffs, Canadian prime minister Mark Carney highlighted that the duties would not only hurt Canda, but also hurt the US automotive supply chain. “It’s not a surprise for us that the US would take some form of reprisal to our response to their unjustified tariff, which was on top of other unjustified tariffs,” he said. “But what message does that send to the workers in Michigan, in Ohio, in Kentucky, in Alabama, who rely on Canadian demand? We’re their largest customer for automobiles, more than the European Union, Japan, Korea, many others combined, and the United Kingdom.”
Similarly, Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association, said that without the affected Canadian parts, US assembly would halt.
USMCA remains in force on annual reviews following the US declining to extend the agreement on July 1.
Automotive Logistics’ take
The delay in implementation does leave time for negotiations to resume. But the latest escalation raises further questions over the long-term assumptions underpinning cross-border vehicle and parts supply chains.
The tariffs, if implemented, could cause major disruption to the North American automotive supply chain. It creates yet more uncertainty, as it leaves OEMs and logistics partners deciding whether to wait it out and see if a deal is reached before January 1, or whether to move supply sourcing and routes now, four months ahead of the potential tariffs. But shifting those flows is neither quick nor simple: Canadian plants and suppliers are deeply integrated with US assembly operations, meaning measures intended to encourage more US production could also increase costs and complexity for factories south of the border.
On top of this, the lack of clarity over whether US content would remain exempt, and how Canadian-made parts would be treated, leaves OEMs and suppliers unable to calculate their true exposure just months before the proposed January 1 implementation.
