Canada’s auto sector could face layoffs, shutdowns because of Trump tariffs, say industry experts

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Canada’s auto sector faces disruption and possible plant shutdowns and layoffs owing to U.S. President Donald Trump’s tariffs, industry experts say.

Mr. Trump on Wednesday unveiled a main plank in his protectionist policies, declaring imported cars a threat to national security and slapping them with tariffs as high as 25 per cent starting April 3. Auto parts will also be taxed as of May 3 or later.

Passenger vehicles and car parts imported into the United States under the Canada-United States-Mexico Agreement on trade will be taxed at a rate of 25 per cent on their non-U.S. content. Since vehicles made in Canada incorporate a substantial amount of U.S. parts – around 50 per cent, on average, by some estimates – many will ultimately face tariffs well below 25 per cent.

Still, the tariffs will lead to higher car prices, fewer sales and less production at North American auto plants, said Patrick Anderson, principal of Anderson Economic Group, an automotive consultancy in East Lansing, Mich.

And Ontario will be hit with job losses, Mr. Anderson said in an interview.

“Michigan is the most affected state, Texas is second-most-affected state, but neither Texas nor Michigan will be affected as badly as Ontario,” Mr. Anderson said. “The epicentre of damage to jobs is going to be in Ontario.”

Production chaos from U.S. tariffs already hurting Canadian companies, auto parts makers warn

Abby Samp, a director at Oxford Economics, said car price increases will be global. In a note to clients, Ms. Samp said there is some capacity at U.S. assembly plants to make room for reshored production. “However, this would come at the expense of reduced competition, higher prices and significantly lower production in the U.S.’s main trading partners,” Canada and Mexico, Ms. Samp said.

The province’s plants run by Ford Motor Co. F-N, General Motors Co. GM-N, Stellantis NV STLA-N, Honda Motor Co. Ltd. HNDAF and Toyota Motor Corp. TOYOF made a total of 1.6 million passenger vehicles in 2024, according to the Canadian Vehicle Manufacturers’ Association (CVMA), most of which were exported to the U.S.

GM’s stock price sank about 7 per cent Thursday, Ford shares dropped about 4 per cent, and shares of Stellantis and Asian automakers also fell.

Automakers and parts suppliers in Canada employ 125,000 people, mostly in Ontario.

Mr. Trump previously said he would lay 25-per-cent tariffs on all imported cars, but the announcement on Wednesday allowed exemptions based on U.S. content in autos assembled in Canada or Mexico.

Assuming a 25-per-cent blanket tariff scenario, the average car price at U.S. dealers would rise by US$4,000 to US$10,000, Mr. Anderson said. Even with some tariffs reduced to reflect U.S. content, many consumers won’t be able to afford the increase in prices and will avoid buying a new vehicle, he said.

“We unfortunately have to anticipate that tariffs of this scale will force the manufacturers to shut down certain production lines,” he said, adding that automakers will scale back their offerings and drop trim packages, equipment options and even entire models.

“Tariffs at this scale reassemble the industrial landscape. And there’s always collateral damage when that happens,” Mr. Anderson said.

GM Canada and Stellantis in Canada referred questions to the CVMA, which represents the Big Three Detroit automakers in this country.

More than half the parts and components in a typical vehicle assembled in Ontario are U.S.-made, while a smaller amount are Canadian, said Brian Kingston, head of the CVMA. This means much of the value in those vehicles won’t be subject to the tariffs.

Mr. Kingston declined to speculate on how the tariffs might affect Ontario’s auto plants, two of which are closed for retooling.

“I don’t want to contemplate that because every effort needs to be focused now on finding a way forward with the Americans,” Mr. Kingston said by phone. “We have to do everything possible to protect the footprints and to continue this integrated market with the Americans. So that’s the priority.”

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Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, which represents 230 Canadian suppliers, reiterated his warning that some of the North American industry will grind to a halt within a week of the tariffs being imposed. All it takes to close an auto plant is for one supplier to stop shipping parts, he said.

Auto industry suppliers operate with an average profit margin of 6 per cent or 7 per cent, and cannot afford to absorb any tariff, he said. The new tariffs are on top of levies on aluminum and steel, with more reciprocal measures promised by Mr. Trump next week, he said.

“The consumer can’t afford to absorb the cost,” Mr. Volpe said. “The automaker can’t afford to absorb it even though they’re on tap for it as the importer of record, and certainly the auto parts makers can’t.”

Late Thursday, Ontario Premier Doug Ford said U.S. Commerce Secretary Howard Lutnick told him that finished vehicles entering the U.S. from Canada that contain more than 50 per cent U.S.-made parts – which would include much of this country’s automotive exports – would be exempt from U.S. tariffs. But Mr. Ford said he’ll wait to see if that is formalized. Soon afterward, in an e-mail to The Globe and Mail, a White House official denied that Mr. Lutnick had made any such assurances. The Globe is not naming the official because they were not authorized to speak publicly.

Lana Payne, national president of Unifor, which represents more than 40,000 workers in the auto sector, called for retaliatory tariffs, a surcharge on energy exports to the U.S. and restrictions on foreign ownership of Canadian critical mineral assets.

“These are our plants, our communities and our country, and we’re fighting for all of it,” Ms. Payne said at a news conference in Oshawa, Ont., on Thursday. “If [corporations] think they can shift production, including factories and mills, and reinvest in the United States and still have free access to our markets you got another thing coming.”

John D’Agnolo, president of Unifor Local 200 in Windsor, Ont., said auto workers would not be able to afford a place to live if they only collect employment insurance in the event of layoffs spurred by tariffs.

“No one could survive on that,” he said. “It would decimate this community.”

Canadians must stick together, Mr. D’Agnolo said.

“I’m telling you, I’m tired of hearing oil versus auto,” he said. “We’re all being tariffed. We’re all together – potash, aluminum, steel. This is where we have to come together as Canadians.”

James Stewart, president of Unifor Local 444 in Windsor, echoed that there must be a united front to defend Canada and its workers.

Those employees, he said, are “worried about their jobs. They’re worried about their futures. They’re worried about their kids’ futures.”

With reports from Jack Rayner and Kristy Kirkup