Canada’s auto sector is bracing for a day of confusion as countries around the world wait for news later Wednesday of new tariffs set to be announced by U.S. President Donald Trump.
David Adams, president of the Global Automakers of Canada, told Global News that the Canadian auto industry was bracing for a day of “complexity and confusion” as it awaits the details of Trump’s “reciprocal” tariffs and the renewed promise of tariffs on foreign-made vehicles.
“I think everybody is, to a certain extent, just as confused in terms of trying to figure out what the actual application will be at the end of the day,” said Adams, who spoke to Global News from Washington, D.C., where he is meeting with U.S. business leaders.
Lana Payne, president of Unifor, said Trump’s tariffs on the auto industry could hurt workers in all three countries – Canada, the United States and Mexico.
“What will occur in the auto industry could be the linchpin of a continent-wide recession,” she said.
Payne said the North American auto sector was already reeling from Trump’s tariffs on steel and aluminum imports, which she said have driven manufacturing costs up.
“This is an industry that for many decades has been interlinked among the three countries and unscrambling that is going to be very, very painful and the reality is, potentially impossible to do,” Payne said.
Patrick Gill, vice president of operations and partnerships for the Canadian Chamber of Commerce’s Business Data Lab, said no G7 economy could afford to go it alone.
“This is like bulldozing your whole house just to redo the kitchen,” he said.
“The hurdles are steep: higher labour costs, billions in facility moves, rising insurance premiums, spiking car prices — and in the end, many businesses may just ride it out and pass the costs to consumers. North America has a lot to lose, and not much to gain,” Gill told Global News.
Trump’s stated aim to shift automobile manufacturing jobs to the United States by placing tariffs on its closest allies will not work, the Canadian Chamber of Commerce is warning.
Analysis from the chamber’s Business Data Lab (BDL) team estimates that Canada and Mexico account for 58 per cent of U.S. auto parts imports and 76 per cent of U.S. exports.
“While some are arguing for the U.S. to reshore manufacturing, shifting auto and auto parts sourcing away from Canada to avoid the 25% tariff, it would take a long time, cost a lot of money, and introduce new risks to the supply chain,” the report released Tuesday evening said.
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Trump has said that he wants to “make the cars in Detroit,” indicating that he wants to replace Canada’s industry with a fully domestic American car industry.
In a recent interview with Fox News, Trump said Canada “stole” the automobile industry from the United States.
“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,” Trump said.
He added, “If we don’t make a deal with Canada, we’re going to put a big tariff on cars. Could be a 50 or 100 per cent because we don’t want their cars. We want to make the cars in Detroit.”
But can that be done?
Adams said, “The reality is that it would take a lot of time and billions and billions of billions of dollars to repatriate the automotive industry fully back to the United States if you could even do that.”
The BDL report estimated that shifting production from Canada to the U.S. would require an average capital investment of $2.3 billion per facility and around three years to build, adding that labour costs in the U.S. were 22 per cent higher than in Canada.
The report said Canadian auto parts suppliers who want to relocate to the United States will face anywhere between $50 million to $200 million in closure costs alone, along with a multi-year delay in getting U.S. operations up and running.
“Given the temporary and political nature of tariffs, most firms would rather absorb costs than relocate,” the report said.
The report added that replacing Canadian-assembled vehicles would translate to pain for American consumers.
“Building new facilities or expanding existing ones in the U.S. would raise the overall price of a vehicle anywhere between $3,500 to $9,000, adding to existing affordability challenges,” it said.
The chamber added that Canada supplies 12 per cent of total U.S. auto parts imports and a 25 per cent tariffs would mean an annual cost increase of around $4 billion.
“If even half of that gets passed to consumers via repair and maintenance, that’s around $2 billion in total increased spending,” it said.
The report added that the cost of the tariffs could get passed on to everything from higher auto insurance premiums to the cost of car repairs.
How does the auto sector work?
The automobile manufacturing sector and its supply chain in Canada and the United States have been deeply integrated since the 1960s.
In 1965, former prime minister Lester B. Pearson and former U.S. president Lyndon B. Johnson signed the Canada–United States Automotive Products Agreement, commonly known as the Auto Pact.
The agreement removed tariffs on cars and car parts between the two countries.
This was in effect until 1994, when the North American Free Trade Agreement (NAFTA) went into effect, extending free trade to all sectors, not just car manufacturing.
In 2018, NAFTA was replaced by the Canada-United States-Mexico Agreement (CUSMA), which is up for re-negotiation in 2026.
This has meant billions of dollars worth of facilities, infrastructure and contracts have been developed between car manufacturers and parts suppliers over decades.
If Trump imposes tariffs, car makers would have to break some of their contracts and abandon infrastructure to move to the U.S.
Canada has 14 car manufacturing facilities, all in Ontario.
American companies General Motors and Ford Motor Company have three plants each in Canada, while three belong to Stellantis, which is partly American owned.
According to the Automotive Parts Manufacturing Association, there are 1,400 parts and tools facilities in Canada. There are 156 Canadian-owned parts and tools manufacturing facilities in the U.S. in 18 U.S. states that employ 50,000 Americans.
Trump is expected to speak at 4 p.m. eastern.
