- U.S. President Donald Trump is threatening a 100% tariff on Canadian-made vehicles
- It’s because Canada “stole” the car industry from the U.S., he said
- That would be on top of 25% steel and aluminum tariffs that Ford’s CEO says will “blow a hole in the U.S. industry that we have never seen”
After first pausing his tariff threat against Canada on February 4, supposedly for a month, but then breaking that promise with a 25% tariff on aluminum and steel just a week later, U.S. president Donald Trump is now threatening to hit Canadian-assembled vehicles with a tariff of 50% to 100% of their value. Speaking with Fox News, Trump said that, “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.”
Following up on that, he said that “if we don’t make a deal with Canada,” he will put a “big tariff on cars” of 50% to 100% “because we don’t want their cars. We want to make the cars in Detroit.”
While the U.S. does build considerably more vehicles than Canada does, factories north of the border churn out about 1.5 million vehicles per year. According to the Canadian Vehicle Manufacturers’ Association (CVMA), auto manufacturing accounts for 128,000 direct jobs in Canada, and contributes more than $18 billion to Canada’s GDP. The Trillium Network for Advanced Manufacturing says Canada shipped 88% of its total vehicle production to the U.S. in 2023, and that “Canada’s export-based automotive industry is almost completely dependent on the United States.” Toyota and Honda are the largest auto manufacturers in Canada, and both have manufacturing plants in the U.S.
Virtually no vehicles are made entirely in-house anymore, and Canada also has a thriving parts-supply industry that, in 2023, added $10 billion to the GDP and employed 80,450 people. More than 43% of Canadian-made parts by value stay in Canadian manufacturing, with most of the remaining sent to U.S. auto plants. It’s estimated that vehicle parts and components can cross the border up to eight times between Canada, the U.S., and Mexico as they are built up and then installed in vehicles.
After many years of tariffs, Canada and the U.S. entered into the Auto Pact in 1965, which removed the levies on cars and parts between the two countries. It was replaced in 1994 with the North American Free Trade Agreement (NAFTA), which included Mexico and extended free trade to industries beyond car manufacturing.
NAFTA was replaced with the Canada-United States-Mexico Agreement (CUSMA) in 2018, which Trump initially proposed and then signed during his last presidency (south of the border, it’s known as USMCA, naturally, for United States-Mexico-Canada). That new deal was basically just an update of NAFTA, although it did require 75% of a vehicle’s parts to be made in one of the three countries, up from the previous 62.5%, in order for the vehicle to move tariff-free across the borders. It also required parts to be made by workers earning a minimum of US$16 an hour; and labour rules and environmental protections were added.
Ford, General Motors, Honda, Toyota, and Stellantis are the only auto manufacturers producing vehicles in Canada, and all in Ontario.
(A 25% levy on steel) across the Mexico and Canadian border will blow a hole in the U.S. industry that we have never seen
—Jim Farley, CEO, Ford Motor Company
Right now, Ford only makes engines in Canada. Its plant in Oakville, Ontario made the Ford Edge and Lincoln Nautilus not long ago, but it ended those model lines and began retooling for electric vehicles — and that, in turn, was halted, with the factory now slated to make F-Series Super Duty trucks starting in 2026, since it seems Ford’s American plants can’t produce enough to meet demand.
General Motors makes the Chevrolet Silverado in Oshawa, Ontario, and is the only plant that produces both light- and heavy-duty versions in the same facility. Its plant in Ingersoll, Ontario, which used to make the Chevrolet Equinox – it was moved to Mexico – now makes the Chevrolet Brightdrop electric delivery van. It also makes engines and parts in St. Catharines, Ontario, and is expected to soon open a battery materials processing plant in Bécancour, Quebec.
Stellantis makes the Chrysler Pacifica, Chrysler Grand Caravan (sold in the U.S. as the Chrysler Voyager), and Dodge Charger – gas and electric – in Windsor, Ontario; it also has a casting plant in Toronto. Its plant in Brampton, Ontario, which used to build the Dodge Charger and Challenger, and the Chrysler 300, is scheduled to produce the next-generation Jeep Compass.
All three automakers have a long history in Canada. A year after Henry Ford incorporated his company in 1903, Canadian businessman Gordon McGregor bought the rights to build Fords in Walkerville – now part of Windsor – and sell them in Canada and most of the British commonwealth through his new Ford Motor Company of Canada. Sam McLaughlin arranged a deal in 1907 to make his McLaughlin-Buick cars using Buick engines and parts, and started building Chevrolets in 1915. And Walter Chrysler established the Chrysler Corporation of Canada just 11 days after he founded Chrysler itself in 1925.
Honda, which opened its first factory in Alliston, Ontario in 1986, makes the Honda CR-V, and Civic sedan, Civic Hybrid, and Civic Si. Toyota began producing vehicles in Canada in 1988. It makes the Toyota RAV4, Lexus NX, and the Lexus RX 350, RX 350h, and RX 500h in Cambridge, Ontario; and additional copies of the RAV4 and RAV4 Hybrid in Woodstock, Ontario.
Regarding the steel and aluminum tariffs, Jim Farley, CEO of Ford in the U.S., said at a conference that a 25% levy “across the Mexico and Canadian border will blow a hole in the U.S. industry that we have never seen,” and that it would give “free rein to South Korean and Japanese and European companies” bringing 1.5 to 2 million vehicles into the U.S. “that wouldn’t be subject to those Mexican and Canadian tariffs.”
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