A day after U.S. President Donald Trump announced sweeping tariffs on many global countries, some analysts say Canada’s auto industry got off easier than expected.
Regardless, Canadian Prime Minister Mark Carney responded on Thursday with counter-tariffs, though it seems those will only apply to a small subset of imported vehicles. Canadian auto dealer reached out to a variety of people in our industry to get their reaction about the latest developments.
Carney announced on Thursday a 25 per cent tariff on vehicles imported from the U.S. that are not compliant with the existing Canadian, U.S., Mexico agreement (CUSMA) and the non-Canadian content of CUSMA-compliant vehicles from the U.S. “Our tariffs will not affect auto parts because we know the benefits of our integrated production system,” he said.
He also noted the Canadian government is developing a “framework for automakers to avoid counter tariffs as long as they maintain production and investment in Canada.”
Carney said Trump’s announcement on Wednesday marked the latest in a string of “unprecedented series of U.S. tariffs” that are designed to reshape the international trading system.
“The ambition of these measures is enormous and the effects on the global economy will be monumental,” said Carney. “The President’s actions will reverberate here in Canada and across the world. Three different sets of U.S. tariffs remain in place and will continue to pose significant threats to Canadian workers and Canadian businesses. While they have been imposed under different premises, some things are consistent. They are all unjustified, unwarranted and in our judgement misguided.”
He added the countermeasures will generate $8 billion to support workers and businesses. He said Canada “will emerge stronger” and the countermeasures will have “maximum impact in the United States and minimum impact here.”
Daniel Ross, Canadian Black Book’s Senior Manager of Industry Insights, said the overall news for the industry is not as bad as some had predicted.
“It’s a little softer than what we had expected,” said Ross. “Overall, I would say there’s not as big a shock to the Canadian market system as it could have been. I would say the Canadian car market has been spared a little bit. Abiding by (CUSMA) has alleviated vehicles made in Canada to sidestep the full tariff amount, which is positive. I think overall our marketplace is a little safeguarded by the global aspect of the auto industry.
“The vehicles coming out of the U.S. to us do have a lot of Canadian content, and I think that is now a feather in our cap on the positive side of safeguarding some prices. But not everything is associated with that obviously. A greater level of vehicles that are entering our market are going to be less susceptible to tariffs, which is great.”
He said Carney’s countermeasures may impact cars headed for the U.S.
“Maybe we could scale it back and say the used car market doesn’t receive tariffs, we just don’t know yet,” said Ross. “That could implicate the used supply moving south, which could help the consumer buy a less expensive car, but then again it doesn’t help the OEMs in the capacity of them being as profitable as they’d like to be.”
David Adams, President of Global Automakers of Canada (GAC), said tariffs on autos “are only going to exacerbate the affordability challenge for consumers.”
“As prices go up, demand goes down, impacting new car sales, which will then have knock-on effects for the used car market. As demand goes up, so will prices. This is not smart policy. Tariffs are taxes.”
After Canada announced counter-tariffs, the GAC issued an updated statement, and used the occasion to assert recommendations on other key policy areas.
“The priority of the automotive industry on both sides of the Canada-U.S. border is continued, stable, free trade between the two jurisdictions. The Government of Canada must seek to secure continued free trade movement of vehicles and parts across North America through the ongoing implementation of the Canada-U.S.-Mexico Agreement (CUSMA) by the three signatory countries,” the GAC said in its statement.
The statement said, while it recognized trade tariffs could disrupt the auto industry, it offered five recommendations for how Ottawa can act to ensure the viability of the country’s auto sector. Those five points were:
- Ensure the automotive industry is proactively consulted on any additional trade actions and should the government choose to enter any potential renegotiations of CUSMA;
- Continue to preserve the integrity of CUSMA;
- Freeze Canada’s ZEV mandate until the industry can support a medium-term review of ambitious, yet achievable regulations. The government cannot mandate automakers to sell EVs while we are facing such significant disruptions in global trade and supply chains;
- Pause additional and new regulations for the automotive sector until the current trade and supply chain uncertainty is resolved; and
- Remove the federal luxury tax on vehicles to support access to new vehicle technologies and avoid compounding taxation.
“GAC and our members remain steadfastly committed to Canada. We need the government working with the industry to give us the flexibility required to respond to these challenging times and continue supporting Canadian workers and customers.”
Dan Park, CEO of Clutch, one of Canada’s leading online car retailers, said there are already significant effects to Trump’s announcement, noting Stellantis has idled its plant in Windsor for two weeks. It has also idled its plants in Mexico.
“You’ve got production slowing down and the car availability will decline, which will be bad for prices, which will go up for consumers,” said Park. “From the consumer perspective it’s a pretty bad thing. Couple that with the overall macro recessionary concerns and consumer purchasing power going down, you are likely going to experience declining demand overall. The question is when you think about new versus used vehicles, demand from the new will likely shift to used, but to what extent is that offset by declining overall demand.”
Sean Mactavish, CEO of Autozen, a digital platform that simplifies and streamlines the car selling process, also offered his perspective. “It’s not a worst-case scenario, but it’s absolutely going to impact new car prices for sure.”
He said he thinks the trickle-down effect will begin “pretty soon.”
“In our end of the business in the past couple of weeks, we’ve seen consumers asking why prices are a little bit higher relative to value than in the past. But the transactions are still happening at relatively stable prices. Wholesale prices have edged up just a little bit in the past week for the first time in a few years.”
Mactavish said in talking to some dealer friends, he found that demand for new cars has remained strong. “We haven’t seen used car prices change significantly yet, but it’s a time-will-tell situation,” he said.
The global stock markets tumbled heavily following the news of Trump’s global tariffs.
Rob Stein, President of Plaza Auto Group, which retails Kia, Volkswagen, Subaru, Mazda and RAM, said he is uncertain of the impact because of the confusing way in which Trump laid out the tariff policies — but felt his specific brands wouldn’t be affected too much.
“There’s only two or three cars that come out of the states between Hyundai and Kia, (but) a lot of the other cars come from Japan, though.”
If you are confused by the tariffs and how they will impact auto, you aren’t alone. In an interview with CBC News, Peter Frise, an auto expert at the University of Windsor said: “Everyone is confused.”
“I just don’t have that many answers and I don’t think anyone will,” Frise said of the new tariff regime. “You know, people may say they understand it, but I don’t think they do because I don’t think that the U.S. government understands what they’re trying to do.”
