Mark Carney said new U.S. tariffs on cars and light trucks are a “direct attack” on workers in Canada’s auto sector, as he faces what will be his first major trade war decision since becoming prime minister.
Carney changed his election campaign schedule to fly back to Ottawa for discussions with members of his cabinet about how the government should respond. US President Donald Trump’s executive action will place 25% import tariffs on autos starting next week, escalating a trade war that has engulfed the U.S.’s largest trading partners.
The tariffs are a clear violation of the U.S.-Mexico-Canada Agreement that Trump signed during his first term, Carney told reporters during an campaign stop on Wednesday in southern Ontario, the heart of Canada’s auto sector.
“We will defend our workers. We’ll defend our companies. We’ll defend our country, and we’ll defend it together,” said Carney. It’s the first time Trump has laid out such specific plans for new tariffs against Canadian industry in an executive action since Carney was sworn in as prime minister on March 14.
Auto tariffs would represent a hammer blow to Canada’s manufacturing business. The country shipped nearly C$50 billion ($35 billion) of vehicles into the US market last year, making autos one of its most important exports. General Motors Co., Chrysler parent Stellantis NV, Toyota Motor Corp. and others all have assembly plants in Ontario.
One option is to put further counter-tariffs on US-manufactured products, Carney said.
Under Trudeau, Canada’s approach was to announce retaliatory tariffs almost immediately after Trump signed executive orders for them. That’s what happened in the first week of March, after Trump put a first round of tariffs on Canadian and Mexican goods, and again when the US administration came out with steel and aluminum tariffs.
Retaliation risk
As a result, Canada has implemented 25% import taxes on about C$60 billion worth of US goods so far, and has threatened tariffs on another C$95 billion, if necessary.
Yet retaliation also risks further escalations from Trump. In a late night Truth Social post, Trump warned Canada and the European Union of “large scale Tariffs, far larger than currently planned,” if the two work together against the US.
Trump’s executive order says importers of automobiles under USMCA will have the opportunity to certify their US content, and a system will be implemented to ensure the 25% tariff only applies to the value of their non-US content.
USMCA-compliant car parts will remain tariff-free until the US commerce secretary, in consultation with U.S. Customs and Border Protection, establishes a process to apply tariffs to their non-US content, the order states.
The order creates significant turmoil in a tightly-integrated sector.
“I have never heard something less clear or based in fact in my life,” Flavio Volpe, head of an industry group representing Canadian auto parts manufacturers, said in a social media post. “China could only dream of damaging the American auto industry so quickly and so decisively as what Trump is threatening to do here again.”
Auto parts manufacturers with large Canadian operations, such as Magna International Inc. and Linamar Corp., have seen their shares fall sharply over the past year, partly because of concerns about Trump and future of North American trade.
Most of the cars and trucks produced in Canada are exported to the US. And a huge number of vehicles go the other way, too: US factories have by far the biggest market share of vehicles sold in Canada.
Overall, the U.S. has a small automotive trade surplus with its northern neighbour. Canada imported C$82 billion worth of cars, trucks and auto parts last year from the US and exported almost C$79 billion, according to data from Statistics Canada.
Canada’s vehicle exports to the US have declined over a long period of time, to 1.1 million units last year, down from about 2 million a decade earlier.
Ontario Premier Doug Ford said it was virtually guaranteed that Canada would retaliate. He urged Carney to “target American cars.”
“I can assure you one thing. We’re going to make sure that we inflict as much pain as possible to the American people without inflicting pain on the Canadian population,” the premier said.
John D’Agnolo, a union representative for Ford Motor Co.’s engine plant in Windsor, Ontario, said the initial announcement from Trump left him hopeful that his factory might be spared the worst. The Windsor plant ships its output to US plants, so it’s a vital cog in Ford’s assembly operations.
“It’s still bad, to be sure. But for us — if we’re not being tariffed for engines that enter the States, to then get assembled there — we might be OK,” he said. “But I just don’t know. These announcements are incredibly vague and confusing.”
Canada is in the middle of a national election campaign that will conclude on April 28. Polls show a close race between Carney’s Liberal Party and the Conservative Party.
--With assistance from Laura Dhillon Kane and Aradhana Aravindan.
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