President Donald Trump has imposed what could be his harshest tariffs to date, targeting a significant portion of the automotive trade across the border and possibly affecting the entire sector in the future.
Starting April 3rd, a new tariff of 25 percent will be imposed on all completed vehicles being brought into the United States. Afterward, some components may face tariffs within weeks, with the possibility that all components could eventually be affected as well.
This is a daunting scenario for hundreds of thousands of Canadians who work in the automotive sector—the biggest player in Canadian manufacturing and the second-leading exporter to the United States, following only oil.
Amid the confusing tangle of tariffs, one goal stands out with striking clarity. Trump laid it bare from the Oval Office as he announced the measures.
His explicit aim is to make doing business with the U.S. so challenging that these companies will abandon their operations elsewhere and shift their production lines there instead.
"All we're doing is saying you can't come in unless you build here," Trump said on Wednesday.
His stance marks the end of a decades-long period of Canada-U.S. free trade in automobiles In reality, Trump is even enforcing higher U.S. tariffs than existed before the 1965 Auto Pact .
Autos are by far the most lucrative manufactured product that Canada sells to the world. This 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.
The full impact is not yet clear. Trump has not explicitly spelled out how many component parts will be penalized. Cars exported to the U.S. under the Canada-United States-Mexico Agreement (CUSMA) might yet be hit with tariffs on their non-American components, pending a review, according to the executive order .
Federal leaders speak out against tariffs
The information quickly spread across Canadian campaign trails.
Liberal Leader Mark Carney said he would return to Ottawa and, as prime minister, convene a meeting on Thursday of the Canada-U.S. cabinet committee.
He suggested that retaliatory measures might follow, and he fumed at Trump's actions as an abdication of the continental trade agreement.
"This is a violation and he has betrayed our trade agreement," Carney said. "A response will happen soon. I won't say more. When it comes to our options, we do have options."
Earlier Wednesday, Carney promised a $2-billion package to protect Canada's auto industry.
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, and said Carney should have recalled Parliament to pass legislation to support workers before calling an election.
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 initial 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.
The tariffs will do real damage, Johnson said, with little benefit to the U.S., as it takes years to build new assembly plants, meaning new supply lines won't magically appear in the U.S. overnight.
"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.
He stated on Wednesday as they awaited the announcement, ' Trump shifts the goalposts twice daily,' adding, 'You never know what to anticipate when you wake up.'
Prior to the announcement, Volpe accurately forecasted the 25 percent tariff; however, he suggested there might be certain exceptions. These could potentially apply to North American components exchanged according to the regulations set out in CUSMA—the agreement Trump was responsible for establishing.
Indeed, Canada is a distinctive trading partner for the U.S.
In contrast to much of the globe, this entity purchases more automobiles and automotive components from the United States than it exports. A study on automobile duties compiled during the initial term of the Trump administration made scant reference to Canada. This document indicated that Canada’s portion of North American vehicle manufacturing had remained fairly consistent since the 1980s, with the significant change being a move away from U.S.-based production toward Mexican output.
However, this renewed Trump administration is increasingly adopting trade protectionist measures and threats thereof, aiming to redirect manufacturing towards the United States.