Prime Minister Mark Carney was quick with Canada’s response to the auto tariffs imposed by the U.S. administration, tariffs that went into effect at Midnight last night.
Canada is imposing a 25-percent retaliatory levy on all U.S.-made vehicles that aren’t compliant with the current CUSMA free trade agreement between Canada, the United States and Mexico.
As well, and similar to the step taken by the U.S., Canada is also imposing a 25-percent tariff on U.S.-made components in imported vehicles that do fall under the CUSMA.
Prime Minister Carney added that the federal government is working on a “framework” that will permit automakers to avoid Canadian tariffs on auto parts, on the condition that those automakers continue to produce vehicles and components here and invest in the Canadian auto industry.
Carney explained that Canada’s new measures are designed to have “maximum impact in the United States and minimum impact here in Canada.”
Update
This afternoon, the CBC reported further details provided by the Prime Minister's Office that clarify how the tariffs on non-Canadian components will work. To cite the example of the Toyota RAV4, the final assembly of which takes place in Canada, it is considered to contain 70 percent U.S.-made parts; 70 percent of it will thus be subject to a 25-percent levy.
That is in the case of CUSMA-compliant vehicles, and since about 90 percent of vehicles crossing between Canada and the U.S. are CUSMA-compliant, that calculation will apply to the vast majority of vehicles. Only the 10 percent of vehicles not compliant with CUSMA will be taxed 25 percent on their total value.
One other important fact that will be relevant - and a massive headache - to automakers: they will be required to identify the provenance and value of every vehicle's parts that come into Canada.
Suspension of sales tax on Canadian cars?
Today, Conservative Party leader Pierre Poilievre joined NDP leader Jagmeet Singh’s earlier call to suspend the federal sales tax on Canadian-made vehicles. There’s no word yet from the Liberal government regarding whether it is considering take such a step.
