How Canada’s auto tariffs differ from Trump’s

DETROIT — Canada’s 25% auto tariffs took effect Wednesday on U.S.-produced vehicles and many parts in American cars and trucks, but the new levies differ in important ways from the U.S. tariffs implemented last week by President Donald Trump.

Canadian officials purposely carved out individual auto parts from the tariffs and are taking into account the United States-Canada-Mexico Agreement, or USMCA, trade deal with the new levies. There’s also a remissions process that could allow companies some relief from the duties, according to Canadian officials.

“We are responding today with, and we responded throughout with, carefully calibrated and targeted counter tariffs,” Canadian Prime Minister Mark Carney said during a Thursday press conference announcing the actions.

Canada’s response, which it reconfirmed Tuesday, includes 25% tariffs on vehicles from the U.S. that are not compliant with USMCA — or CUSMA, as Canada refers to it — as well as non-Canadian and non-Mexican content of USMCA-compliant fully assembled vehicles imported into Canada from the U.S.

The latter part means that even if a vehicle made by General Motors, Ford Motor or Chrysler parent Stellantis in the U.S. is compliant with USMCA, the parts that aren’t from Canada and Mexico could be taxed, pending a remission process.

Trump’s 25% tariffs, meanwhile, are on any vehicle not assembled in the U.S., which S&P Global Mobility reports accounted for 46% of the roughly 16 million vehicles sold domestically last year. The White House has said it also plans to place tariffs on some auto parts such as engines and transmissions by May 3.

Flavio Volpe, who leads the Automotive Parts Manufacturers’ Association in Canada, said his organization believed it was crucial to have the individual automotive parts carved out because tariffs on those products could rapidly shut down the North American auto industry.

“What we advised the prime minister was ‘keep parts out of this for now,'” he told CNBC on Tuesday. “We also insisted that if you’re going to do counter tariffs, make sure you’re targeting American. Don’t by accident or by omission hurt our Mexican sources, partners. Nobody wants to do this … but Canada has to respond.”

Mexico content was exempted, unlike the U.S., because the country is honoring the USMCA North American trade deal, Carney said last week.

GM, Ford and Stellantis each separately said their North American-produced vehicles are compliant with USMCA, however the content of each varies greatly.

The traditional “Detroit automakers,” as well as Toyota Motor, are among the top-selling car companies in Canada. The country’s overall market is far smaller than the U.S., at roughly 2 million light-duty vehicles compared with around 16 million in the U.S.

Canada’s trade balance in regards to light-duty passenger vehicles was $8.33 billion, with $43.82 billion exported against $35.49 billion imported, according to leading Canadian auto firm DesRosiers Automotive Consultants.

Trade imbalances have been one of the driving forces for Trump’s implementation of the tariffs.

There could be some relief for automakers on the Canadian tariffs.

Officials said “a remission framework for auto producers that incentivizes production and investment in Canada, and helps maintain Canadian jobs, will also be implemented.”

Canadian officials in a press release Tuesday said more details about the program will be “announced shortly.” The Department of Finance Canada, which released the news, did not respond for a request for comment.

“We are planning to ensure that the automakers do stay in Canada,” Canadian Minister of Industry Anita Anand said Monday on CityNews in Canada. “We actually are talking about a framework that we’ll put in place, we call that out remission framework, to ensure that Canadian production and investment is part of the long-term plan to maintain Canadian production.”

Trump has said that there would not be exemptions for the U.S. tariffs, despite automakers lobbying for carveouts for vehicles and parts that are compliant with USMCA, which Trump negotiated during his first term in the White House.

Five automakers — Ford, GM, Stellantis, Toyota and Honda Motor — were estimated to produce 1.3 million light-duty vehicles last year in Canada, largely for U.S. consumers, according to Trillium Network for Advanced Manufacturing.

The carmakers did not immediately respond regarding the Canadian remission process.

Carney last week said Canada’s new levies are expected to generate 8 billion Canadian dollars (US$ 5.6 billion), which will be used to help workers and companies affected by Trump’s tariffs. Vehicle imports from the U.S. totaled CA$35.6 billion in 2024, according to the Department of Finance Canada.

Carney spoke bluntly about his disdain for the U.S. tariffs, which he called “unjustified, unwarranted and … misguided.” He also painted a dire future for the friendly relationship between the U.S. and Canada.

“That era has now ended unless the United States and Canada can agree on a new comprehensive approach,” Carney said. “While this is a tragedy, it also is the new reality. We must respond with both purpose and force.”

The U.S. and Canada have participated in a tariff-free trade deal that covers the automotive industry since the Canada-United States Automotive Products Agreement, commonly known as the Auto Pact, in 1965.

Canada is attempting to fight Trump’s tariffs in other ways as well, claiming they are illegal. The country on Monday filed a dispute with the World Trade Organization concerning Trump’s 25% tariffs on automobiles and automobile parts imported from Canada into the U.S.

The Canadian automotive industry has been on an upswing following a decades-long decline that escalated during the Covid pandemic.

Light-duty vehicle production in Canada hit 1.54 million vehicles last year, up from a recent low of 1.1 million in 2021, but still a 47% decline from the country’s peak of 2.9 million in 2000, according to industry data provided by the Global Automakers of Canada trade association.

“Canada continues to respond forcefully to all unwarranted and unreasonable tariffs imposed by the U.S. on Canadian products. The government is firmly committed to getting these U.S. tariffs removed as soon as possible, and will protect Canada’s workers, businesses, economy and industry,” François-Philippe Champagne, Canadian minister of finance, said Tuesday in a statement.