Canada’s auto sector reels as U.S. tariffs roll out, met with retaliation

Liberal Leader Mark Carney announces retaliatory 25 per cent duties on American vehicles

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Published Apr 03, 2025  •  5 minute read

An auto hauler is shown with new Pacifica models at the Stellantis Windsor Assembly Plant on Thursday, March 27, 2025. Stellantis said it will shutter the plant for two weeks starting Monday. Photo by DAN JANISSE /Windsor Star

The impact of tariffs imposed by the United States set in on Thursday when Stellantis NV announced it would shutter its Windsor Assembly Plant, where it makes sports cars and minivans, for at least two weeks beginning next Monday.

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The move puts Windsor, Ont. — long considered Canada’s unofficial auto sector capital and located just across the river from Detroit — one step closer to losing its last-remaining vehicle assembly plant and it underscores the fragility of the entire auto sector as the U.S. unleashes a barrage of tariffs.

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Although Canada will not face the “reciprocal” tariffs that U.S. President Donald Trump announced on Wednesday — which impose a baseline 10 per cent tariff on other countries goods, including vehicles, and significantly higher levies in many cases — it did not get off scot-free.

Canadian-made vehicles still face a 25 per cent auto tariff, which can be reduced based on the value of U.S.-made auto parts contained within any vehicle. Roughly estimated, some analysts said U.S. auto parts make up 50 per cent of the value of a Canadian-made vehicle on average, which reduces the tariff by half to 12.5 per cent. Nonetheless, that alone will eat up margins, they said.

“Yeah, sure, it could have been a lot worse, but the fact is we still have unjustified tariffs,” David Adams, president of the Global Automakers of Canada, a lobbying group for foreign automakers, said. “It’s like somebody only broke one of our arms instead of both of our arms, but you still have a broken arm.”

Automakers are also feeling the costs of 25 per cent tariffs on steel and aluminum, which came into effect in March, and they are bracing for potential tariffs on core auto parts, which the U.S. government has signalled will be implemented on May 3, according to Reuters.

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Adams had said his clients did not want Canada to enact retaliatory countermeasures because that would only add new trade barriers and further hamper their businesses.

But Liberal Leader Mark Carney had previously signalled the federal government would “do everything in its power to protect Canadian workers and businesses,” and on Thursday he announced retaliatory 25 per cent tariffs on U.S. autos.

In a mirror of the U.S. policy, the value of the vehicle subject to the levy is reduced by the value of Canadian parts contained within the vehicle.

Despite some opposition against such measures, there was pressure to act as the U.S. tariffs encouraged automakers to use more U.S.-made parts, and they could even entice some Canadian parts companies to move operations to the U.S.

On Monday, Windsor-based Titan Tool and Die Ltd., an auto-parts company, found itself in a standoff with members of Unifor Local 195, who blocked the company from moving a truckload of equipment to a facility in Michigan (full disclosure: Unifor represents members of the Financial Post).

Eventually, the company reached an agreement with workers to unload the truck, but the standoff highlights how workers are ready to act to protect their livelihoods.

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Windsor Mayor Drew Dilkens said he believes workers want Canadian politicians to play hardball with Trump. Even though Ontario Premier Doug Ford earlier this year backtracked on his policy to put tariffs on electricity exports to the U.S., Dilkens said he believes Ford won in the court of public opinion.

“The public wants to see us stand up to the president because they know we’ve got clean hands (on trade),” he said. “They want someone who can speak up and echo their sentiments because all they can do is stand up and boo at a hockey game.”

Dan Sharkey, a lawyer in Michigan at Brooks Wilkins Sharkey & Turco PLLC, said some other auto-parts companies may follow Titan and try to relocate operations to the U.S. as a result of the tariffs, but he predicted this would be limited since logistical realities will prevent many from doing so.

The largest auto assembly plants are simply too complex to move, he said. Such plants require hundreds of millions of dollars or even billions of dollars of investment, and site selection can take years as analysts sift through reams of data on everything from available electricity and rates to the labour force.

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Even smaller operations use equipment that is too heavy to be easily moved, Sharkey said. A tool-and-die company, which produces forms to shape metal parts, may be the exception.

“The other thing is labour is really tight here in the U.S.,” he said. “It’s not like you snap your fingers and find labour, so it’s not like you can just cross the river and you’re churning out parts.”

Sharkey said most of his clients are waiting to see how long the tariffs persist and whether Canada responds with countermeasures that cancel out any benefits of relocating to the U.S. before making a major decision.

Trump has stressed that any company can avoid the tariff by investing in manufacturing facilities in the U.S., but the tariffs are likely to cause pain to auto companies operating there, too.

For example, Stellantis said it is closing operations in both Canada and Mexico so that it can assess the impacts of the tariffs, but those closures will also have an impact on U.S. facilities that support those plants.

U.S. consumers will also feel the effects of tariffs. Canada exports around 1.1 million vehicles to the U.S., accounting for seven per cent of the total market there, according to TD Economics. As a result, tariffs could add anywhere from US$5,000 to US$10,000 to the price of a new vehicle, with many analysts predicting that used vehicle prices will also rise as a result.

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“All the economic analysis I look at shows that this is devastating,” Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, a lobby group for U.S.-based automakers, said. “I don’t believe that Americans and the U.S. economy are willing to sustain significant damage in the interests of this policy.”

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He said the tariffs would need to be in place for the better part of a decade and create billions of dollars in costs for automakers and auto parts before there would be significant increases in auto manufacturing investment in the U.S.

Trump has said the auto tariffs are permanent, but few people within the auto sector believe that his administration will be able to endure the economic pain they create.

“It’s unrealistic,” Kingston said.

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