Canada said its 25% tariff on U.S.-made vehicles that are not compliant with the North American trade deal would take effect on Wednesday.
Prime Minister Mark Carney had said last week this duty was in the offing, and it was in response to the Trump administration’s 25% tariff on all foreign-made cars, including from its northern neighbor and partner in the U.S.-Mexico-Canada trade treaty as renegotiated during Trump’s first term. Under USMCA terms, vehicles can be shipped duty free among the three countries so long as three-quarters of the components used originate from North America, and that nearly half of the vehicle’s production involved workers earning at least $16 an hour.
Canada said this 25% duty would remain in place until the Trump administration drops its hefty levy on Canadian-made vehicles.
Canada is the U.S.’s largest export market for cars, and officials estimate that about 8% of the 750,000 vehicles shipped to Canada from the U.S. are not compliant with the trade treaty.
The Congressional Research Service has said some auto manufacturers elect to pay a duty on the cars produced and shipped within North America because they believe that’s more cost efficient than adhering to the regional-content requirements.
Under Canada’s auto-tariff plan, vehicles from Mexico would not be affected, and Ottawa has no plans to slap duties on auto parts given their importance in the integrated supply-chain network.
“Canada continues to respond forcefully to all unwarranted and unreasonable tariffs imposed by the U.S. on Canadian products,” said Finance Minister Francois-Philippe Champagne.
Trump’s auto tariffs have already had ramifications in Canada, with Stellantis temporarily halting production at its auto assembly factory in border city Windsor, Ontario, for two weeks.
Trump has also threatened a 25% tariff on foreign-made auto parts — a move that auto-industry leaders here warn could spark a shutdown in automobile production.
Canada emerged from Trump’s Liberation-Day trade-policy unveil with no new tariffs other than what the White House previously announced, notably the 25% tariff on vehicles; 25% duty on steel and aluminum; and a 25% charge on Canadian imports that are not USMCA compliant.
