Sam Fiorani
Only days after Canada and the United States appeared close to a deal that could have reduced U.S. tariffs on Canadian-built vehicles, the talks collapsed and President Donald Trump threatened to raise automotive tariffs to 50 per cent on Jan. 1, 2027.
The escalation has renewed concerns about the future of Canadian auto manufacturing. But Sam Fiorani, Vice-President of Global Vehicle Forecasting at AutoForecast Solutions, says automakers are unlikely to abandon Canada, citing longstanding investments, skilled labour and the deeply integrated North American supply chain.
As Canadian auto dealer reported last week, the proposed agreement was expected to reduce the top-line U.S. tariff on Canadian-built cars and light-duty trucks from the existing 25 per cent to 15 per cent. Credits for U.S.-made content could have reduced the effective rate further.
Negotiations collapsed on Aug. 21 amid several unresolved issues, including whether the tariff relief would extend to medium- and heavy-duty trucks. The existing 25 per cent automotive tariff remains in place, while Trump’s subsequent threat would double that rate on Canadian-built cars, trucks and automotive parts beginning Jan. 1.
That rapid reversal has shifted the discussion from the terms of a possible agreement to a larger question: whether sustained tariffs could eventually force automakers to move production out of Canada.
Fiorani does not expect that to happen. “If they wanted to get out of Canada, they would have done it years ago,” he said.
“There have been plants shut down in Canada over the last 20 years,” he said. “There is a benefit to using Canadian labour and Canadian parts and Canadian suppliers. And keeping the factories moving and the Canadians happy helps the bottom line of these car companies.”
Fiorani said Ford, General Motors and Stellantis have continued operating and investing in Canada despite previous plant closures and changes to their manufacturing footprints. But he said the current threat is unlike anything Canadian-based automakers have faced during the era of continent-wide free trade.
North American vehicle manufacturing has operated under a free-trade framework since the North American Free Trade Agreement took effect in the mid-1990s. Trump’s first administration renegotiated that agreement, replacing it with the United States-Mexico-Canada Agreement.
“In the second administration, he has decided the U.S. doesn’t need Canada,” said Fiorani.
He said a 50 per cent tariff would place significant pressure on Ford and GM, particularly around truck production. At the same time, recent investments and labour commitments suggest automakers are not preparing for an abrupt Canadian exit.
Ford and Unifor ratified a new three-year collective agreement in July covering more than 5,000 Canadian workers. The agreement was accompanied by $1.25 billion in planned investment across Ford’s Canadian operations, including its Oakville, Windsor and Essex facilities.
Fiorani said those commitments make it unlikely Ford would shutter its Canadian plants. He also expects the two countries to reach some form of agreement before the threatened tariff increase takes effect.
“The Trump administration’s negotiating tactic is to throw the biggest tariff possible against a country and have them come to the table grovelling for scraps,” said Fiorani.
Despite the increasingly confrontational rhetoric, he remains optimistic that Canada can secure an agreement that recognizes the economic relationship between the two countries.
“Getting a good deal for Canada and the U.S. would require both sides understanding the relationship between these two countries,” he said. “Without Canada, the U.S. and Mexico working together, they really can’t compete on a global scale in the automotive industry.”
Fiorani said the dispute could drag on because both governments need to demonstrate that they defended their respective interests. He also said Ottawa must be careful not to impose retaliatory measures that create additional damage for Canadian businesses and manufacturers.
“Simply putting a tariff on everything from the U.S. hurts Canadians and Canadian factories,” he said. “Finding a way to balance out getting what they need without hurting Canadians is likely the plan.”
On Tuesday, Ottawa announced a new round of counter-tariffs at rates of 15, 25 and 50 per cent on $27.6 billion worth of U.S. goods, effective Sept. 8. The measures focus on products including steel and aluminum, dairy, appliances, agricultural equipment, pulp and paper, plastics and electronics.
The package does not add new automotive countermeasures, although Canada’s existing counter-tariffs on U.S. vehicles will remain in place.
“What we see now is it’s unchanged on the automotive front, so the smart retaliatory measures that were made are steady as she goes for now,” said Huw Williams, CADA’s Public Affairs, in an interview with Canadian auto dealer.
Williams said Prime Minister Mark Carney’s decision to suspend negotiations reflected Ottawa’s conclusion that the final U.S. terms did not adequately respect Canada’s economic independence.
“When Prime Minister Carney made the decision to pull away from negotiations, it was clear that the Americans were not negotiating seriously,” said Williams, adding that the process also failed to demonstrate respect for “an independent economy and an independent state.”
