DETROIT — On Wednesday, Canada’s 25% tariffs targeting U.S.-produced vehicles and several parts significant to American cars and trucks officially came into effect. These new tariffs bear notable differences from the tariffs imposed last week by President Donald Trump.
Canadian officials have strategically excluded certain auto parts from the tariffs and are considering the implications of the United States-Canada-Mexico Agreement (USMCA) in the application of these new levies. Furthermore, there exists a remissions process that may offer some companies relief from these duties, as indicated by Canadian authorities.
During a press conference on Thursday outlining the measures, Canadian Prime Minister Mark Carney emphasized, “We are responding today with, and we have responded throughout with, carefully calibrated and targeted counter tariffs.”
Canada’s response, reaffirmed on Tuesday, encompasses 25% levies on vehicles from the U.S. that are non-compliant with USMCA, also referred to as CUSMA in Canada. This also applies to the non-Canadian and non-Mexican components of USMCA-compliant fully assembled vehicles brought into Canada from the U.S.
This aspect implies that even if a vehicle manufactured by General Motors, Ford Motor, or Chrysler’s parent company Stellantis adheres to USMCA, any parts not sourced from Canada and Mexico could still incur taxes, subject to a remissions process.
In contrast, Trump’s 25% tariffs apply to any vehicle not assembled in the U.S., which S&P Global Mobility has reported accounted for 46% of the nearly 16 million vehicles sold in the U.S. last year. The White House has announced plans to extend tariffs to select auto parts such as engines and transmissions by May 3.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association in Canada, emphasized the importance of excluding individual automotive parts from the tariffs. He warned that imposing tariffs on those components could swiftly cripple the North American auto industry.
“Our advice to the prime minister was to keep parts out of this for now,” Volpe conveyed to Finance Newso on Tuesday. “We also urged that if counter tariffs are to be enacted, they should specifically target American products to avoid inadvertently harming our Mexican partners. This situation is unwanted, but Canada must respond.”
Unlike the U.S., Mexico has been exempted from these levies due to its compliance with the USMCA, Carney noted last week.
General Motors, Ford, and Stellantis each asserted that their vehicles manufactured in North America comply with USMCA regulations; however, variations exist in the content of these vehicles.
Major automakers, including the traditional “Detroit automakers” as well as Toyota Motor, represent some of the highest-selling car manufacturers in Canada, although the Canadian market remains considerably smaller than the U.S., with around 2 million light-duty vehicles sold as compared to approximately 16 million in the U.S.
According to DesRosiers Automotive Consultants, Canada’s trade balance for light-duty passenger vehicles stood at $8.33 billion, with $43.82 billion in exports versus $35.49 billion in imports.
This trade imbalance has been a significant factor motivating Trump’s tariff initiatives.
Remissions?
Automakers may gain some reprieve under the Canadian tariffs through a new remission framework.
Officials have indicated that this framework aims to encourage production and investment within Canada, as well as to help maintain Canadian jobs.
Canadian authorities announced on Tuesday that further details regarding this program would be provided soon. The Department of Finance Canada has not yet responded to requests for additional comment.
Canadian Minister of Industry Anita Anand stated on Monday during an interview with CityNews that plans are underway to ensure automakers remain in Canada. “We are developing a framework that we refer to as the remission framework, aimed at securing Canadian production and investment as part of our long-term strategy,” Anand said.
Trump has maintained that exemptions will not be extended for the U.S. tariffs, despite lobbying efforts from automakers seeking relief for USMCA-compliant vehicles and parts negotiated during his previous administration.
According to the Trillium Network for Advanced Manufacturing, five automakers — Ford, GM, Stellantis, Toyota, and Honda Motor — produced an estimated 1.3 million light-duty vehicles in Canada last year, mostly aimed at U.S. consumers.
The automakers have yet to issue statements regarding the remission process proposed by Canada.
Carney indicated last week that the Canadian levies may yield CAD 8 billion (approximately USD 5.6 billion), aimed at supporting workers and companies impacted by Trump’s tariffs. Vehicle imports from the U.S. came to CAD 35.6 billion in 2024, according to the Department of Finance Canada.
‘Unjustified, unwarranted … misguided’
Carney expressed strong criticism toward the U.S. tariffs, labeling them “unjustified, unwarranted, and … misguided.” He suggested that the friendly relations between the U.S. and Canada have shifted dramatically.
“That era has now ended unless there is a new consensus approach between the U.S. and Canada,” Carney remarked. “While this may be unfortunate, it represents the reality we now confront. A robust response is essential.”
The two nations have enjoyed a tariff-free trade relationship in the automotive sector since the 1965 Canada-United States Automotive Products Agreement, known as the Auto Pact.
Canada seeks to contest Trump’s tariffs on various fronts, asserting they are illegal. Just recently, Canada lodged a dispute with the World Trade Organization regarding the 25% tariffs imposed on cars and auto parts imported from Canada into the U.S.
The Canadian automotive industry has been experiencing a revival following a prolonged decline that intensified during the COVID-19 pandemic.
Light-duty vehicle output in Canada reached 1.54 million units last year, a significant increase from a low of 1.1 million in 2021, although this figure still reflects a 47% decrease from the all-time high of 2.9 million in 2000, according to data from the Global Automakers of Canada trade association.
“Canada continues to react decisively against all unreasonable tariffs imposed by the U.S. on Canadian goods. Our government is committed to removing these U.S. tariffs promptly and will protect the interests of Canadian workers, businesses, and the economy,” stated François-Philippe Champagne, Canada’s Minister of Finance, in a recent statement.
