Canada Announces 25% Tariff on U.S. Manufactured Vehicles

Canada announces 25% tariff on U.S.-manufactured vehicles that do not comply with the North American trade agreement, effective Wednesday. Prime Minister Mark Carney had signaled this move last week as a direct response to the Trump administration’s tariffs on foreign-made vehicles.

Response to Trump’s Auto Tariff

The new levy mirrors the 25% tariff imposed by the U.S. on all foreign-made cars, including those from Canada. This comes after the renegotiation of the U.S.-Mexico-Canada Agreement (USMCA) during Trump’s first term. According to the agreement, vehicles can be imported duty-free if 75% of their components are sourced from North America.

Impact on U.S. Vehicle Exports

Canada is the largest export market for U.S. cars, with an estimated 8% of the 750,000 vehicles shipped annually from the U.S. failing to meet the USMCA requirements. The new tariff will affect these non-compliant vehicles, raising costs for U.S. manufacturers.

Exclusion of Mexican Vehicles

Under the new policy, vehicles from Mexico will remain unaffected. The Canadian government also clarified that it has no plans to impose tariffs on auto parts, recognizing their essential role in the integrated supply chain across North America.

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Minister’s Strong Statement on Tariffs

Finance Minister Francois-Philippe Champagne stated, “Canada will continue to respond decisively to all unjust and unreasonable tariffs imposed by the U.S. on Canadian goods.” This underscores Canada’s commitment to defending its trade interests.

Impact on Canadian Auto Industry

The effect of Trump’s auto tariffs has already been felt in Canada. Stellantis, an automotive manufacturer, temporarily halted production at its Windsor, Ontario assembly plant for two weeks. Industry leaders have also expressed concern over Trump’s threats to impose a 25% tariff on foreign-made auto parts, a move that could disrupt automobile manufacturing.

Limited Additional Tariffs

Following Trump’s “Liberation-Day” trade-policy announcement, Canada opted not to impose any new tariffs beyond those already disclosed. These include the 25% tariff on vehicles, steel, aluminum, and non-USMCA-compliant imports from Canada.