U.S. President Donald Trump has levelled what may be his most devastating tariffs yet, hitting a sizable chunk of the North American cross-border auto trade and potentially all of it at a later date.
A new 25 per cent duty will strike all finished vehicles imported into the United States starting on April 2, along with some parts later and potentially all parts eventually.
It’s a frightening prospect for hundreds of thousands of Canadians whose jobs are connected to the auto sector — the largest manufacturing industry in Canada and second-largest source of exports to the U.S. after oil.
The tariffs are slated to take effect next week, but the president suggested he could take a phased approach.
“What we’re going to be doing is a 25 per cent tariff on all cars that are not made in the United States. If they’re made in the United States, there is absolutely no tariff. We’ll start off with a 2.5 per cent base, which is what we were at, and we’ll go to 25 per cent,” Trump told reporters in the Oval Office on Wednesday.
Cars imported to the U.S. under the Canada-United States-Mexico Agreement (CUSMA) will be hit with tariffs only on their non-American components, a release from the White House said.
Autos are the second-largest Canadian export after oil — and by far the most lucrative manufactured product that Canada sells to the world, linked to hundreds of thousands of Canadian jobs.
That makes these tariffs potentially more significant than any of the other trade threats from Trump, including the 10 per cent levy on energy and the 25 per cent tariffs on steel and aluminum.
Federal leaders speak out against tariffs
Liberal Leader Mark Carney said the tariffs are “a direct attack” against Canadian workers and that the government will be looking at its options for possible retaliation against the U.S.
“We have anticipated this possibility,” he told reporters Wednesday evening. “We will take the steps that are in the interests of Canadian workers, of Canada. We’re going to stand up for Canada. We’re going to be united.”
Carney will be returning to Ottawa from the campaign trail on Wednesday night and will meet with members of his U.S.-Canada cabinet committee on Thursday to discuss how to respond. Earlier Wednesday, he promised a $2-billion package to protect Canada’s auto industry.
Liberal leader Mark Carney brought his campaign to Windsor on Wednesday, touting a $2-billion proposal aimed at protecting Canada’s auto industry. Pratyush Dayal reports.
Conservative Leader Pierre Poilievre said Trump needs to “knock it off” with his trade war.
“We had the best trade relationship in the world, in the history of the world, before these unnecessary interruptions struck our economy, and they’re hurting both sides of the border,” he told reporters Wednesday evening.
Poilievre blamed Liberal “weakness” for the position Canada is in and said the country needs to diversify its trade markets and cut taxes to help workers and businesses.
NDP Leader Jagmeet Singh said Trump’s latest action was a “full frontal attack on autoworkers.”
“There are hundreds and thousands of workers right now that are wondering if their line is going to shut down and if they’re going to lose their job…. We’ve got to fight back like hell,” he said.
Singh called for retaliatory tariffs and supports for workers.
How do U.S. 25 per cent auto tariffs impact the federal election campaign in some of Ontario’s most trade-exposed regions? Two Ontario watchers weigh in on how this could play out in the campaign: The Toronto Star’s Queen’s Park bureau chief Rob Benzie and founder of the Queen’s Park Observer, Sabrina Nanji.
Ontario Premier Doug Ford said Canada will need to fight the new tariffs — and called for retaliatory tariffs that “maximize the pain for the Americans.”
“I feel terrible for the Americans, but it’s one person, it’s President Trump that is creating this chaos,” he told reporters at Queen’s Park. “We aren’t going to roll over. We’re going to do everything we possibly can.”
One analyst lamented that this is a departure from 60 years of tradition, starting with the 1965 Auto Pact that led to Canada-U.S. free trade. Furthermore, it makes a mockery of the agreement that Trump himself signed, CUSMA, which was supposed to allow for stable, predictable trade.
“The Americans have lost their credibility in terms of being a reliable trading partner,” said Fraser Johnson, an expert on auto supply chains at Western University’s Ivey Business School in London, Ont.
He said Trump’s latest move won’t fully stall the industry. For starters, nearly three-quarters of Canada’s auto jobs involve parts, not finished vehicles. But the vast majority of those finished vehicles are exported to the U.S.
Johnson said the tariffs will do real damage, with little benefit to the U.S., as it takes years to build new assembly plants.
“This is not good news for anybody,” he said. “I don’t really see how it helps the North American auto industry — certainly in Canada but also in the U.S.”
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said it’s creating paralyzing uncertainty for the industry — and not just in Canada.
The constant, always-evolving tariff threat is also scaring investors in the U.S., he told CBC News.
“[Trump] moves the sticks twice a day,” he said on Wednesday while awaiting the announcement. “You don’t know what to expect when you get up in the morning.”
Speaking before the announcement, Volpe predicted a 25 per cent tariff, but with some exemptions, possibly on North American parts traded under rules in CUSMA, the deal Trump himself made.
Canada is, indeed, a rare trading partner for the U.S. Unlike the rest of the world, it actually buys more cars and parts from the U.S. than it sells.
The first Trump administration produced a report on auto tariffs and it barely mentions Canada. It showed that Canada’s share of North American auto production has been relatively stable since the 1980s, and that the real shift has been from U.S. production to Mexico.
But this second Trump administration is more aggressively embracing trade protectionism, and the threat of it, in the hope of steering production to the U.S.
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