As Canada braces for 25 per cent U.S. tariffs on steel and aluminum, U.S. President Donald Trump says he is considering an additional tariff on Canadian-made cars, which could be as high as 50 to 100 per cent.
In an interview with Fox News on Monday, Trump said Canada “stole” the automobile industry from the United States.
“If you look at Canada, Canada has a very big car industry. They stole it from us. They stole it because our people were asleep at the wheel,” Trump said.
He added, “If we don’t make a deal with Canada, we’re going to put a big tariff on cars. Could be a 50 or 100 per cent because we don’t want their cars. We want to make the cars in Detroit.”
The automobile manufacturing sector and its supply chain in Canada and the United States have been deeply integrated since the 1960s.
In 1965, former prime minister Lester B. Pearson and former U.S. president Lyndon B. Johnson signed the Canada–United States Automotive Products Agreement, commonly known as the Auto Pact.
The agreement removed tariffs on cars and car parts between the two countries.
This was in effect until 1994, when the North American Free Trade Agreement (NAFTA) went into effect, extending free trade to all sectors, not just car manufacturing.
In 2018, NAFTA was replaced by the Canada-United States-Mexico Agreement (CUSMA), which is up for re-negotiation in 2026.
Trump on Monday signed a pair of presidential proclamations imposing 25 per cent tariffs on steel and aluminum, with no exceptions or exemptions.
“It’s a big deal. This is the beginning of making America rich again,” Trump said as he signed the orders in the Oval Office.
The Trump administration said the move was meant to shore up the U.S. steel and aluminum industries and to protect America’s economic and national security.
Prime Minister Justin Trudeau says Ottawa will work to convince Trump that his steel and aluminum tariffs will hurt both countries.
Get breaking National news
For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen.
A senior government source told Motorcycle accident toronto today on Tuesday that Finance Minister Dominic LeBlanc is heading to Washington, D.C. later in the day and will meet with Howard Lutnick, Trump’s pick to run the U.S. Commerce Department, on Wednesday.
SHUTDOWN IMMINENT, WARNS INDUSTRY
Industry voices are warning that a tariff on Canadian-made cars could lead to a shutdown of the entire North American auto industry.
“Last week, when we thought we were getting a 25 per cent tariff on everything, including cars and parts, I said that as soon as those tariffs come in, within a week, the industry would be shut down,” said Flavio Volpe, president of the Automotive Parts Manufacturers Association.
Volpe said a tariff directed at the car industry would have the same impact.
“It’s going to cause the cessation of production by American car companies,” he told Motorcycle accident toronto today.
Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers Association, said, “If you put in place tariffs, which are taxes of the scale that are being contemplated by the United States, it could lead to production stoppages, job losses and of course, price increases for Americans.”
Volpe said “hundreds of suppliers and dozens of automakers” have said in meetings that they would refuse to pay Trump’s surtax, which would bring the industry to a grinding halt.
“Everybody agreed that we would shut down, so it would be immediate,” he said.
Volpe said the supply chain is so integrated, even one supplier backing out would have immediate impacts.
“Imagine if you make seats in London, Ontario for a Jeep plant in Toledo, Ohio, and they do 1,000 Jeeps a day. You can’t stockpile 5,000 Jeeps worth of seats on your property. The plant in Toledo, Ohio, can’t take seats and wheels and motors and everything else and put them somewhere. These are incredibly large, bulky and valuable goods,” he said, adding that most suppliers in the car industry work with 24-hour inventories.
Tu Nguyen, economist at RSM Canada, said, “A tariff on Canadian-made cars would be akin to cutting off one’s nose to spite one’s face.”
She said it was very rare for a car to be made entirely in Canada.
“The North American auto manufacturing sector is so integrated that a car can cross the border up to eight times before it is fully assembled,” she said.
Trump in his interview said he would rather see production shift to Detroit, the heart of the U.S. automotive industry.
“If you were to replace Canadian production, you would need five or six assembly plants to be built in the United States. That would cost about US$50 billion and it would take upwards of 10 years. That is not a realistic or feasible proposal,” he said.
Nguyen said it would cost “billions of dollars and a decade” for the U.S. to match Canada’s capacity to build some car parts facilities.
She added that Trump’s move would give European and Asian automakers an edge.
“Major U.S. auto producers would be hard hit by the tariffs. Not only would this hurt the major North American automakers by delaying production and increasing costs, but this move would also propel Asian and European automakers, which are not subject to the same tariff, to prosper and out-compete the North American companies,” she said.
Kingston said if Canada retaliates, it could hurt American consumers.
“An American consumer going to buy a new vehicle could see new vehicle prices increase by $6,500, if not more,” he said.
‘CANADA DID NOT STEAL CAR INDUSTRY’
Volpe said Trump’s claim that Canada “stole” America’s car industry is an “outright lie.”
“The Canadian auto sector was built by Ford Motor Company starting in 1904. And General Motors traces its roots back to 1908 in in in Oshawa. And so we built this industry together, with the best of American intentions and to the benefit of Detroit,” he said.
Kingston said, “Canada is the largest export market for U.S. motor vehicles in the world. In fact, exports to Canada are larger than all exports to China, Germany and Mexico combined.”
He added that the bulk of new investment in the auto space since the new CUSMA was signed has gone to the U.S.
“There has been over US$288 in new automotive investment into North America. That investment came into North America on the premise of this trade agreement that we have this large, integrated North American market. Eighty per cent of that investment, that’s gone into the United States. The remaining amount has been split between Canada and Mexico,” he said.
With a file from The Canadian Press and Global’s Bryan Mullan.