Canada Strikes Back Against American-Made Cars With Tariffs Of Its Own
America isn’t the only country imposing tariffs on cars. A back-and-forth with China that now has the US dropping a 104 percent bomb on Chinese imports gets headlines, but America’s closest ally and a major importer of US-built vehicles has just fired back with new tariffs of its own that are likely to have a significant effect on vehicles like the Ford F-150, the best-selling vehicle in Canada.
Canada Adds Tariffs To US-Built Vehicles
The Government of Canada has just implemented 25 percent tariffs on certain vehicle and parts imports from the US. Finance Minister Francois-Philippe Champagne said that “Canada continues to respond forcefully to all unwarranted and unreasonable tariffs imposed by the US on Canadian products. The government is firmly committed to getting these US tariffs removed as soon as possible, and will protect Canada’s workers, businesses, economy, and industry.”
Canada’s tariffs will be applied to “non-Canada-US-Mexico Agreement (CUSMA) compliant fully assembled vehicles imported into Canada from the United States” as well as on “non-Canadian and non-Mexican content of CUSMA compliant fully assembled vehicles imported into Canada from the United States.”
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The American president will hit the US’ closest neighbors with 25 percent, while China will get smacked with a 10 percent tariff.
Compliance with the CUSMA trade agreement requires certain regional value content, labor value content, and North American steel and aluminum procurement. It isn’t exactly clear which vehicles might be affected by the change.
Canada Not Taxing US Auto Parts. Yet
The second portion would affect more vehicles. It tariffs the value of all parts made outside of Canada or Mexico in a vehicle. For US-built vehicles, this could effectively amount to the full content value of the vehicle.
Minister Champagne also announced that a remission framework would be introduced to help incentivize production and investment in Canada. This would let automakers import without or with lower tariffs, though details are still to come.
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There are going to be some casualties.
Roughly one million vehicles are exported from the US to Canada each year, and nearly all would likely be affected to some extent by these tariffs. Currently, the Canadian tariff does not apply to auto parts before they are assembled into a vehicle. The US is currently applying its own 25 percent tariff to auto parts imports from Canada as well as on Canadian-assembled vehicles.
Entire Industry In A State Of Flux
Even as we report on this story, things could be changing, as just hours after Canada announced its tariffs, President Trump announced a 90-day pause on tariffs for most countries – China excluded. It remains to be seen whether Canada will pause its reciprocal tariff, or whether this will go ahead.
For the consumer, and automakers, caught in the middle, this is a period of extreme uncertainty. Automakers don’t know whether to pause imports, stockpile as much as possible, or increase prices, while consumers don’t know what they’ll be paying for a new car. Not even dealerships can guarantee what you’ll pay at this stage, making the car-buying market extremely tricky right now. The knock-on effects for the new car market are expected to be massive, while the used market is likely to explode, with prices driven to highs that may reach or even exceed the levels seen during COVID.
