Canada’s auto industry is bracing for what could be a prolonged battle over tariffs and vehicle production.
After U.S. President Donald Trump imposed a 25 per cent tariff on all Canadian goods exported to the U.S. on March 4, the stock market tanked, the heads of U.S. automakers spoke up, and the following day he gave the auto sector a one-month tariff reprieve.
On Thursday, he extended the one-month pause to all Canadian and Mexican goods covered by the CUSMA free trade agreement.
The one-month delay provides little comfort to auto industry leaders, however, as public comments from the U.S. administration suggest the tariffs are part of a strategy to pressure automakers into shifting production back to the U.S. Canada’s auto industry is bracing for what could be a difficult battle.
In a press briefing Wednesday, March 5, White House Press Secretary Karoline Leavitt said the one-month reprieve on tariffs for the auto sector came after requests from the heads of U.S. automakers. She said the one month delay was to give the car companies time to: “Shift production here to the United States of America where they will pay no tariff. That’s the ultimate goal.”
In a briefing with reporters, Leavitt said Trump told the automakers they should “get on it, start investing, start moving.”
The U.S. administration’s goals to bring manufacturing back to the United States, are outlined on the White House website where they keep track of all the “wins” including some related to auto investments.
Here is an excerpt from the website that has been recently updated and links these investment decisions to the U.S. tariffs:
President Trump is securing historic investments as companies seek to make their products in America instead of paying tariffs.
- Nissan CEO Makoto Uchida said President Trump’s tariffs could push the car manufacturer to move its production from Mexico to the U.S.
- Honda is expected to produce its next-generation Civic hybrid model in Indiana.
- After a meeting with President Trump, Stellantis announced it will reopen its assembly plant in Belvidere, Illinois — putting 1,500 employees back to work — and build its next-generation Dodge Durango in Detroit, Michigan. The company also announced new investments in their Toledo, Ohio, and Kokomo, Indiana, facilities.
Flavio Volpe, President of the Automotive Parts Manufacturers Association (APMA), told BNN Bloomberg that the idea that auto manufacturers could suddenly pivot to build vehicles in the United States is out of step with the reality of how long these projects take to plan and execute.
“(U.S. President Donald Trump’s) invoking tariffs on inputs into the U.S. economy because he thinks that (is) what will happen is people will reinvest. Well, in the auto business, these are 10- or 20-year investments,” Flavio Volpe told BNN Bloomberg.
“People don’t reinvest based on the whim of the president of the United States. He’s destabilizing the market in the U.S. People will have lower disposable income, the cost of money’s going to go up. Nobody’s looking to invest.”
According to figures from the APMA, vehicles are Canada’s second largest export by value at $51 billion in 2023, of which 93 per cent are exported to the United States. Canada supplies about 8-9 per cent of the vehicles Americans buy each year, with Mexico providing about 20 per cent.
In a statement after the one-month tariff reprieve for auto was announced, Brian Kingston, President and CEO of the Canadian Vehicle Manufacturers’ Association (CVMA) said: “The CVMA welcomes the U.S. tariff exemption provided for Canadian-manufactured vehicles and parts that meet stringent USMCA/CUSMA content requirements. We look forward to working on a permanent solution that recognizes the integration of the North American market and reinforces the strong standards established in the USMCA/CUSMA.”
Other politicians are appearing regularly on U.S. cable television channels trying to reach Americans and policymakers.
“As far as I am concerned, the tariffs are still on, we will not relent,” said Ontario Premier Doug Ford in an interview on CNN. “We are going full steam ahead. We have to protect our families, our workers and our businesses.”
Ford said that Canada was the number one market for U.S. produced vehicles. “We buy 400 per cent more than Mexico and 200 per cent more than any country in the entire world,” he said.
Meanwhile, the Canadian government imposed its own tariffs on a selected group of U.S. products entering Canada, with a plan to levy more tariffs later. Click here to review the full list of U.S. goods that Canada is subjecting to counter-tariffs
Canadian auto dealer will continue to monitor the situation as it unfolds.
