President Trump is threatening to escalate tariffs on vehicles imported from Canada to 50%, adding more chaos to an industry challenged by trade wars.

Published on: Aug 26, 2026, 17:41:50 IST

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The reignited trade war between the U.S. and its northern neighbor hit a fever pitch this week after President Trump proclaimed, “We don’t need Canada, they need us.”

The American auto industry, however, sees things differently.

Detroit’s carmakers in particular could see some of their most profitable products walloped if Trump follows through on a threat to double tariffs on cars and auto parts from Canada to 50% from 25%.

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Stellantis assembles the Chrysler brand’s popular Pacifica minivan just across the border in Windsor, Ontario. General Motors produces pickup trucks at a factory in Oshawa, Ontario. Ford is set to begin making F-Series Super Duty trucks later this year at a plant near Toronto in Oakville, in addition to at a factory in Kentucky. And Ford and GM each produce engines in Canada for trucks and SUVs sold in the U.S.

Canada—the U.S.’s second-largest trading partner—accounted for 8% of North American vehicle production in 2025, according to industry data provider Omdia. While that is down from about 13% a decade ago as jobs and production have moved to Mexico and the U.S., the country remains a key maker of cars and parts—not to mention a buyer of them. Canada is the biggest export market for larger American trucks.

UBS analysts said Honda and Toyota would be most exposed to increased tariffs, with Canadian imports accounting for roughly one out of every 10 vehicles the companies sell in the U.S.

Automakers, for now, view the Jan. 1 deadline set by Trump as a sign that the higher levies are less a threat and more of a negotiating tactic with Canada, people familiar with the companies’ thinking say. Most are waiting to see how the talks develop before considering reassessing their production strategies, the people said.

Ford, Stellantis, Honda, Toyota and GM declined to comment.

Still, there is reason for concern. Stephen Beatty, a former vice president at Toyota’s Canada division, said one of Canada’s most effective responses would be to ratchet up tariffs on full-size U.S. pickups, such as Ford’s F-150, if Trump follows through with his threat.

“Canada is not without its options here,” Beatty said. “Hopefully, we don’t get to that point.”

Thomas Kowal, chief executive of Michigan auto parts maker Leggera Technologies, said his company could benefit from the proposed tariffs, since its magnesium parts compete with aluminum from Canada.

“My greater concern is the broader manufacturing industry,” Kowal said, citing years of disruptions from the Covid pandemic, inflation and tariffs. “I worry about how much additional pressure the industry can absorb.”

The prospect of tariffs doubling on vehicle imports from Canada also is happening amid talks of overhauling the North American trade deal, known as the U.S.-Mexico-Canada Agreement, a pact that is crucial to the U.S. auto industry’s day-to-day business.

“We urge U.S. and Canadian negotiators to reach a deal that enhances North American auto competitiveness and brings about a successful USMCA review,” said Matt Blunt, head of the American Automotive Policy Council, a trade group that represents GM, Ford and Stellantis.

Trump first hit Canadian imports with tariffs, including steel and vehicles, early in his second term, prompting Canada to levy retaliatory duties on American-made cars and metal products. Cars and parts from Canada, which cross borders several times before being put inside a vehicle, are currently subject to a 25% tariff, with some relief on parts that comply with stringent USMCA requirements.

Detroit’s automakers have responded to tariff ups and downs by planning to onshore production of certain vehicles and parts to the U.S. Most recently, Stellantis has indicated it is eyeing the sale of a Toronto-area factory, following pressure from Trump for companies to relocate more operations to the U.S., a union representing Canada’s auto workers said this month.

However, moving auto production from one factory to another is neither quick nor easy. Reshoring efforts can take years—a daunting prospect when tariff rates fluctuate often.

Barclays analyst Dan Levy said that Canadian production accounts for about 6% of U.S. auto sales, so a 50% tariff on vehicles is “likely manageable.” But a key question remains on whether parts compliant with the USMCA, the trilateral trade pact, would continue to be exempt from levies, Levy wrote in a note Monday. “We believe there is a significant lack of clarity on this point.”

The U.S. declined to renew the USMCA in July, prompting a review of the trade pact. Trump then threatened to hit $20 billion worth of Canadian goods with 50% tariffs, in part to force the Canadian government to the negotiating table.

Trump said last week that a deal was close that would result in tariffs on Canadian vehicles dropping to 15%. However, Canadian Prime Minister Mark Carney said talks fell apart after U.S. officials sought to deny tariff relief to medium- and heavy-duty vehicles, which would make the country’s auto industry less competitive over time.

United Auto Workers President Shawn Fain, a supporter of Trump’s existing automotive tariffs, said the latest threat against Canada is misguided and suggested tougher trade action against other countries.

“If we’re going to increase tariffs anywhere, it should be on countries where automakers continue to offshore jobs because they can pay workers $3 an hour, force them to work in unsafe conditions, and crack down on independent unions,” Fain said Tuesday.

Warren Browne, an industry consultant, said car sales would likely fall next year if the tariff increase goes into effect, assuming automakers respond with increases in sticker prices and shipping charges.

“The U.S. and Canada will both face serious hardship if this scenario becomes policy,” Browne, a former GM executive, said Tuesday in a note.

Write to Ryan Felton at ryan.felton@wsj.com and Christopher Otts at christopher.otts@wsj.com

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