Trump threatens to double Canadian auto tariffs in latest escalation of trade war
Tomas Kauer 
United States President Donald Trump on Monday announced that he plans to raise tariffs on Canadian autos and auto parts to 50 per cent starting in January, marking the latest escalation of trade tensions between the two countries.
“On January First, 2027, Tariffs on all Cars, Trucks, both large and small, Automotive Parts, and Steel, will be increased to 50%, Trump wrote on the social media site Truth Social. “Build in the U.S. and there are ZERO TARIFFS. Canada will be treated like a State no longer!”
The announcement comes after U.S. tariffs targeting $28-billion worth of Canadian goods went into effect on Saturday following the breakdown of talks between Washington and Ottawa on Friday night.
Prime Minister Mark Carney, who likened the U.S. trade demands to an attack, said Canada would retaliate with dollar-for-dollar tariffs of its own on Sept. 8.
Tariffs on autos were a central part of the tensions that ultimately derailed the trade discussions on Friday.
For decades, the two countries’ auto sectors have been integrated with many of the same companies building autos and shipping parts back and forth over the border.
Currently, the Canadian auto sector faces a 25 per cent tariff on vehicles exported to the U.S., but that amount can be lowered based on the percentage of U.S. parts contained within a vehicle.
There was talk during the latest negotiations of lowering the tariff to 15 per cent, but Carney said Saturday that the U.S. had not been willing to extend that rate to medium or heavy vehicles such as trucks.
That exclusion would have hurt companies such as Ford Motor Co., which recently invested billions of dollars to build F-Series pick-up trucks in Oakville, and General Motors Company, which builds pick-ups in Oshawa, as well as some bus manufacturers.
Initial reaction suggested Canadian industry leaders were taking this latest threat in stride.
One executive, granted anonymity because of the sensitivity of the matter, said the four-month wait undercut the severity of Trump’s threat.
But overall there was little doubt that the escalating trade war spelled bad news for the health of Canada’s auto sector.
Ryan Robinson, firm director and global automotive research leader at Deloitte Canada, said auto production in Canada had already been on a “steady decline” even before the U.S. drafted its tariff regime in 2025.
Both the existing tariffs on autos, as well as tariffs on Canadian steel and aluminum, have all raised the costs of manufacturing here.
The threat to double tariffs on autos and auto parts piled even more uncertainty onto the picture.
“It’s difficult for me to make the math square on looking forward and seeing any incremental automotive investments from where we are now,” Robinson said. “At this point, I think we’re just trying to maintain what we have in a very difficult environment.”
At the same time, he added that it’s not clear as yet how broad the new tariffs will be and whether they will target higher value items such as engines and transmissions.
“I don’t think we’re entirely clear what it applies to, which may be the point,” Robinson added.
Dawn Desjardins, chief economist at Deloitte Canada, said one of her main concerns is that the “persistently uncertain (economic) environment” would undermine business confidence and hold back investment.
But even as the tariffs remain months away from going into effect, there are some businesses already reeling.
Mike Kilby, chief executive of Chatham, Ontario-based Dajcor Aluminum Ltd., a downstream company that processes aluminum and counts on the auto sector for 20 per cent of its business, said he was already worried that existing tariffs would lead to heavy layoffs. Now, he’s fearing it could be worse than imagined.
He said his company spent Monday examining which customers are likely to be affected by the new tariffs and making calls.
“We’re just saying, ‘Let’s get them now before they move to another competitor, especially in auto, they’ll do it in a heartbeat,” said Kilby.
Although Kilby said he understood why the federal government would reject a ‘bad’ trade deal with the U.S., he also raised concerns that Canada needs to take a more protectionist approach to align itself with the U.S. on trade.
Specifically, Kilby said he has concerns that Canada has become a “backdoor” for aluminum extruded imports from non-market countries to enter into the U.S.
Already, he said his sector is having difficulty competing on price with some of the imports. Now that it is losing customers in the U.S. as a result of the tariffs, he fears he may have to shutter his Canadian operations.
“I’ve got a facility in the U.S., I can just shift the business,” he said. “If it comes to a point where I have to mothball the facility and lay all these people off, that’s what it will come to. It’s sad. I hope it doesn’t.”
He said he wished the federal government would take bold measures to block out foreign aluminum extruded imports; it could always roll back some protections later, Kilby said.
“You’ve got to shoot first, ask questions later,” he said. “If the U.S. is saying, ‘you need to shut the backdoor, I’d be listening. Otherwise, they’re just going to hollow out our industries.”
• Email: gfriedman@postmedia.com
