U.S. President Donald Trump declared this morning that he intends to raise tariffs on cars, trucks and auto parts coming from Canada to 50 percent as of January 1, 2027. Canadian steel would also be targeted by the increase.
The announcement was made Monday morning on Truth Social, a few days after the failure of trade negotiations between Ottawa and Washington. As reported by Reuters, the tariffs would also hit Canadian steel.
Doubling up the pain
Currently, vehicles assembled in Canada and exported to the U.S. are subject to 25-percent tariffs on the portion of their content that does not comply with the provisions of the Canada–United States–Mexico Agreement (CUSMA).
According to Reuters, both governments were until recently still discussing a reduction in the rate applicable to Canadian vehicles, from 25 percent potentially down to 15 percent. Discussions were stalling mainly over how to calculate the North American content eligible for exemption.
Trump's new threat therefore represents a major shift in direction.
In a message directed at American businesses particularly in the automotive and steel sectors, the U.S. president told them: “Build in the US and there are ZERO TARIFFS.” He added that Canada will no longer be treated “like a state.”
Trade negotiations failed
This new statement comes following the failure of trade talks between the two countries on August 21. Just days earlier, Ottawa and Washington had appeared to be close to a deal that would notably have reduced tariffs on vehicles as well as Canadian steel and aluminium, as reported by Reuters.
The Canadian government is now preparing retaliatory measures targeting select US products; counter-tariffs are set to take effect on September 8th.
The Canadian and U.S. auto industries are highly integrated, with vehicles and components regularly crossing the border during the production process. A hike to 50 percent could have significant repercussions on Canadian plants that export a large share of their output to the U.S. market.