As the Canadian automotive industry braces for the impact of tariffs on vehicles exported to the United States, its Southern neighbour is bracing for the impact on imported vehicles.
Even before Wednesday’s “Liberation Day” announcement from U.S. President Donald Trump, Cox Automotive’s Chief Economist Jonathan Smoke said how this will all unfold at the U.S. borders is “yet to be fully understood.” However, he also noted that the directives from the administration are beginning to come into focus.
“We had expected the postponed 25 per cent tariffs on Canada and Mexico and some reciprocal tariffs to go into effect on April 3, the day after what the president has called “Liberation Day. That expectation was reflected in our downwardly revised sales forecast for the year,” said Smoke in a statement. “The announcement that all imported vehicles will see 25 per cent tariffs will have a broader impact on the auto market.”
In a Commentary & Voices update, he said increasing domestic production is an “admirable goal,” but that change cannot happen overnight nor over a few years. Smoke expects the evolution to be slow and difficult, with vehicle sales eventually falling, new and used prices climbing, and certain models eliminated.
He also said the tariffs are not a negotiation gambit, but rather an attempt to restructure the U.S. auto market in a way that favors their domestic production.
Erin Keating, Executive Analyst at Cox Automotive, said they have seen this story before when supply became constrained during COVID and prices skyrocketed.
“While the increase in prices this time may be for completely different reasons, it still stands to reason that the market will not bear another significant increase, at least not for those in need of affordable transportation, especially those households earning less than $100,000,” said Keating in a statement. “We saw 10 per cent of these buyers exit the new-vehicle market over the same period.”
