OTTAWA – The Canadian automotive industry wants the governments of Canada and the U.S. to redouble their efforts to secure a trade deal, after the long-standing Aug. 1 deadline was missed. Washington and Ottawa will maintain tariffs on automobile and parts trade between their two countries, with anticipated increases in costs, prices and possible layoffs, Canadian industry leaders say. 

U.S. President Donald Trump on Aug. 1 increased baseline tariffs on Canadian goods not complying with the US-Canada-Mexico Agreement (USMCA) from 25% to 35% – impacting certain materials and components – although specific auto parts and completed vehicles are not affected. These will remain covered by existing 25% Section 232 tariffs, with reductions for vehicles comprising minimum levels of American content.  

Brian Kingston, president and CEO of the, Canadian Vehicle Manufacturers' Assn. (CVMA), tells WardsAuto, “Most Canadian vehicle production is 50% to 60% percent U.S.A. content, so the effective tariff is probably 10%- to 12.5% percent.” And while those rates will depend on manufacturing practices, even the lower range is damaging, given the tight profit margins within the Canadian automotive sector, says Kingston. 

The same applies to American automotive and parts manufacturers selling into Canada markets, some of whom will have to continue paying retaliatory 25% tariffs imposed by the Canadian government, given the lack of a deal. These are charged on U.S. exports not compliant with the USMCA’s requirements for origin, labor and other parametersrequirements, with some special dispensations for manufacturers who make autos in Canada, including Ford, which is retooling its Oakville, ON, plant.

David Adams, CEO, Global Automakers of Canada, says the impact of these tariffs, including the additional red tape needed to comply with exemptions, means extensive costs on both sides of the border. In the U.S. and in Canada, “at some point all of these costs will have to be pushed on to the consumer,” he predicts. “When you see that happening you will see consumers balking and pulling back their purchase intentions. That would mean fewer (workers)people on (a) shift (on a vehicle- or parts-assembly line).” Used-autos demand will rise because of higher new-vehicle prices, causing used prices to inflate too, Adams says. 

And the trade flows are huge. A CVMA report notes , “Canada is the largest U.S. export market for passenger vehicles and light trucks, with: U.S. exports of $23 billion recorded in 2024 – more than U.S. exports to Germany, Mexico and China combined.” The reportIt adds: “Canada builds 9% of the vehicles Americans purchase annually. U.S.-manufactured vehicles are responsible for over 40% of Canadian vehicle purchases.”

Meanwhile, DesRosiers Automotive Consultants data says Canada exported C$43.8 billion’s ($31.8 billion) worth of light vehicles in 2024. 

And according to the Observatory of Economic Complexity (OEC), Canada exported C$15.6 billion’s ($11.3 billion) worth of auto parts and accessories to the U.S. in 2024 and imported C$18.5 billion's ($13.4 billion) worth of these products from the U.S. the same year.

Adams says some of his members are now reviewing whether to shift importing vehicles from their American plants to those in other countries, whose exports do not attract Canadian tariffs. Subaru has been looking at sourcing from its Japanese plants, for example. Nissan halted deliveries of U.S.-made Murano models into Canada. And Mazda stopped shipping CX-50 crossovers from its joint U.S. assembly plant with Toyota in Alabama s to Canada. Meanwhile Global Automakers of Canada’s his non-Detroit Three member manufacturers have been exploring ways to keep production stable in Canada, Adamshe says.  

The Ontario government, whose province hosts the vast majority of Canadian automotive and parts production, has been calling on its federal government to take aggressive action. Ontario Premier Doug Ford says: “Canada shouldn’t settle for anything less than the right deal. Now is not the time to roll over. We need to stand our ground.” Given U.S. auto tariffs are still in place, he is calling on the federal government "to hit back with a 50% percent tariff on U.S. steel and aluminum,” which would push Canadian automakers to purchase such inputs domestically.  

Ford says his government will “do whatever is needed to support workers and businesses” impacted by the tariffs, including speeding up regulatory approvals for industrial projects and building new infrastructure to diversify Canadian trading partners. 

Speaking Aug. 1 to Canadian national broadcaster CBC, Flavio Volpe, Canada’s Automotive Parts Manufacturers' Assn. president, and a member of the Council on Canada-U.S. Relations, says the trade talks are still ongoing, despite the passage of the Aug. 1 deadline: “Team Canada is still in Washington working on a deal and they will be there until we have a conclusion of a good deal for Canada, or if it's time to take a pause and walk away because there just isn't the right deal.”

Kingston is optimistic that a deal can still be struck soon to roll back the tariffs: “There's a mutually beneficial agreement to be had here. Canada is the largest market for U.S. manufacturers by far.” He says the agreements struck with Japan and the European Union give more favorable access to the U.S. for vehicles made with almost zero American content than for Mexico and Canada, whose manufacturers use plenty of U.S. parts and materials. 

However, a review of the USMCA is scheduled to begin in October, which could lead to the regional trade agreement being renegotiated.

Adams warns that if the current tariff talks fail to yield much progress within two weeks, inevitably attention will turn to the review – which could freeze current talks and protection: “If the current dialogue doesn't deliver anything...it will flow into the review,” he predicts.