Canadian auto tariffs take effect amid escalating US trade dispute

Retaliatory 25% levy targets non-CUSMA US vehicles and components

Canadian auto tariffs take effect amid escalating US trade dispute

Canada imposed retaliatory tariffs on US auto imports starting Wednesday at 12:01 am ET, Ottawa announced.

The new measures include a 25% tariff on all non-CUSMA-compliant vehicles imported from the United States, as well as a 25% tariff on US-made components within CUSMA-compliant vehicles.

The move comes in response to the United States' own auto tariffs, which took effect on April 3, the same day prime minister Mark Carney announced Canada's countermeasures. A day earlier, US president Donald Trump imposed a sweeping set of “reciprocal” tariffs on key trading partners, including Canada.

Canadian- and Mexican-made components of finished vehicles will not be affected by the new tariffs. Auto parts, in general, are also exempt from this round, although a separate US measure targeting Canadian auto parts is scheduled to take effect on May 3.

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

The Department of Finance added that details are forthcoming on a remission framework that will redirect tariff revenues to support the Canadian auto sector and affected workers.

Tariff fallout

The escalation adds further complexity to an already volatile trade landscape.

“As the US trade war kicks into gear, Canadians are being dragged into uncharted territory,” said Clay Jarvis, spokesperson for NerdWallet Canada. “Tariffs could be in place for some time, and their ultimate fallout is a complete unknown, so we all need to do what we can to plan both for tomorrow and for months from now.”

Read next: Trade tensions weigh on Canadian confidence, Bank of Canada says

The broader implications are still being assessed, but financial institutions are beginning to weigh in. At Scotiabank’s annual general meeting in Halifax, CEO Scott Thomson called for a longer-term, domestic growth strategy to reduce reliance on external trade relationships.

Thomson, while stopping short of directly criticizing the US tariffs or the current tone of the Canada-US relationship, said Canada has “let its growth and productivity stagnate.”

“It’s time to stop relying so much on external relationships that Canada has perhaps taken for granted, and instead build more capacity at home,” he told shareholders.

He called for the removal of internal trade barriers and stronger investment in resource development, including critical minerals, potash, and particularly energy exports. That path forward, he said, would require significant public and private investment in infrastructure, a skilled workforce, and streamlined project development.

“The bank has not made knee-jerk reactions in the face of evolving macroeconomic conditions,” Thomson added. “We’ve stuck with our plans in these volatile times.”

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