The Canadian automotive industry faces even greater uncertainty in the Canada-U.S. trade conflict with the threat of a new 35 per cent tariff (what may be non-CUSMA) on Canadian goods starting August 1.
DesRosiers Automotive Consultants said industries have been left guessing as to the pace and effects of these threats, while also attempting to develop a strategy even as the rules appear to be constantly changing. “The automotive industry, a key target throughout this trade conflict, has been no different,” they said.
“In reply to the existing U.S. tariffs, on April 9 Canada implemented counter-tariffs on U.S.-built light vehicles coming into the country, but offered relief to the five companies that manufacture vehicles within Canada through confidential Remission Orders,” said DAC in its latest update. “Now that Q2 sales are in the books, we thought it would be timely to look at if there have been any resulting changes in sourcing as a result.”
Based on DAC’s analysis, the second quarter of the year saw U.S.-built light vehicles account for around 39 per cent of new light vehicle sales. This figure is down from 41 per cent in Q1. DAC also said if the five OEMs building in Canada are excluded, that figure slips to 7 per cent of the sales market — less than the 9 per cent figure in Q1.
There appears to be little change so far in vehicle sourcing, which DAC said was unsurprising as most OEMs are taking the ‘wait and see’ approach to the trade negotiations. Furthermore, many of the vehicles sold in Q2 came from a high amount of inventory imported prior to the counter tariffs.
“While the remission orders mean that the exact extent of the Canadian counter tariffs on U.S. vehicles are unclear, the actual reach of the counter tariffs may be somewhat more limited than was feared months ago,” said Andrew King, Managing Partner at DAC, in a statement. “However, these pressures are not evenly split and there will be significant pain points for specific brands and models.”
Examples include the Mazda CX-50 and Nissan Pathfinder; imports of these models into Canada have been paused as a result of the counter tariffs. DAC expects more of these situations to arise and greater price increases the longer the trade issue continues.
