US auto tariffs would slam Canada’s motor vehicle industry

US President Trump’s recent threat to impose 25% targeted tariffs on US imports of autos and parts beginning April 3 would slam Canada’s motor vehicle industry. The biggest hit would be in Ontario, which accounts for 85% of Canada’s auto and parts industry, but there would also be knock-on effects for regions with firms that supply inputs to the auto sector.

What you will learn:

• Using Oxford Economics’ Global Economic Model and new tariff levers in our Canada Provincial Territorial Model, we find that Trump’s 25% tariffs on the non-US content in auto and parts imports would cut Canada’s motor vehicle exports by more than 6% in 2025. This would equate to a loss of C$550mn, or 3.3%, in motor vehicle and parts production and more than 2,200 layoffs in the industry this year.
• Trump vows that US auto tariffs are permanent. This would put the United States-Mexico-Canada trade pact in jeopardy. With permanent tariffs, our modelling suggests that by 2029 Canada’s motor vehicle and parts exports would fall 10% below our baseline, output in the sector would drop C$1bn, or 5.4%, and auto sector employment would fall by 6,000.
• The negative economic impact roughly doubles in a scenario where Canada retaliates with parallel 25% tariffs on the US content of motor vehicles and parts imported from the US. We estimate this would cause new car prices in Canada to rise 5%-10%.

For more insights on the 2024 US Presidential Election, click here.