Canada Imposes 25% Retaliatory Tariffs on US Automobiles, Ford and GM Most Affected

According to Bloomberg, Canada has taken countermeasures against US President Trump's auto tariff policy, imposing an import tariff of up to 25% on cars assembled in the US, with major US automakers bearing the brunt.

According to estimates by Jato Dynamics, Ford, General Motors, and Stellantis are the three largest automakers in terms of sales share in Canada, and they rely on imports from the US. Jato Dynamics stated that most of the products sold by these automakers in Canada are manufactured in the US.

Canada's retaliatory tariffs were announced after the Trump administration imposed tariffs on imported cars and trucks last week. Under Canada's new regulations, the tariff amount for a car will depend on its auto parts, and it is noteworthy that parts from Mexico are exempt.

For example, if a car is assembled in a US factory with 80% of its parts made in the US and 20% made in Mexico or Canada, Canada's 25% retaliatory tariff will only apply to the US-made parts, resulting in a final total tariff rate of 20%.

If a car does not comply with the USMCA (a trade agreement signed during Trump's first term) in terms of manufacturing and transportation, Canada's tariff rate on US-made cars will be 25%.

The Canadian government is attempting to mitigate the impact on the Canadian economy by allowing automakers to apply for "exemptions," which would reduce some tariff costs if these automakers continue to produce cars in Canada. Due to the uncertainty caused by tariffs, Stellantis implemented a short-term shutdown plan this week at a factory in Ontario, Canada.

Nevertheless, according to Brian Kingston, CEO of the Canadian Vehicle Manufacturers' Association, as automakers incorporate tariffs into costs and establish new parts tracking systems, the cost of cars could increase by $4,700 to $12,000 within weeks. It is reported that the Canadian Vehicle Manufacturers' Association represents the interests of General Motors, Ford, and Stellantis in Canada.

Brian Kingston stated in an interview: "The current requirement for the auto industry is to elevate supply chain management to a new level, with a detailed understanding of the source path of each part." He added that US tariff policies are becoming another challenge for Canadian auto production, noting that "such trade barriers will weaken the overall competitiveness of the industry."

For some observers, this marks the beginning of a new era for Canada's auto industry—an industry that once heavily relied on its trade capacity with the vast southern market (the US). Data from Jato Dynamics shows that the vast majority of cars produced in Canada are exported to the US, and 44% of new light vehicle sales in Canada in 2024 will come from US factories. When including auto parts trade, the US has a slight trade surplus with Canada.

Andrew King, managing partner of DesRosiers Automotive Consultants, said: "Despite the absurd rhetoric and flawed data calculations from the US, Canada's era as a net auto exporter has long ended. The structural risk of 95% of our auto exports being concentrated in a single country has become evident in recent developments."