US President Donald Trump has threatened to raise tariffs on all cars, trucks and automotive parts imported from Canada to 50% from January 1, 2027, escalating a trade dispute after negotiations between the two countries broke down last week.
The proposed increase comes after trade talks collapsed on Friday over several unresolved issues. A deal under discussion would have reduced tariffs on Canadian cars and light-duty trucks from 25% to 15%, while duties on aluminium and steel would have been cut from 50% to 25%.
However, disagreements remained over the scope of the proposed tariff relief, including whether it would cover medium- and heavy-duty trucks.
The latest threat could disrupt one of the world’s most closely integrated automotive supply chains. US carmakers rely heavily on Canadian vehicles and components, meaning higher tariffs could increase production costs and potentially push up prices for American consumers.
Trump said companies that manufacture vehicles in the United States would face no tariffs, while also accusing Canada of taking an overly entitled approach to trade relations.
US Treasury Secretary Scott Bessent said Washington wanted Canada to return to negotiations and engage in good faith.
Canadian Prime Minister Mark Carney, meanwhile, said a mutually beneficial agreement remained possible, but stressed that any deal would require the United States to respect Canada’s sovereignty and approach the negotiations as a genuine partner.
Trump’s latest warning also sent automotive shares lower. Ford and Stellantis shares fell by 3.6% and 4.2%, respectively, while General Motors dropped 1.6%. Toyota and Honda also recorded declines in US trading.
Canada remains one of America’s biggest trading partners. US trade in goods and services with Canada totalled US$872.3 billion last year, while Canada sends about three-quarters of its exports to the US and imports almost half of its goods from its southern neighbour.
Canadian automotive parts manufacturers warned that tariffs on components would ultimately affect US vehicle assembly plants. Industry representatives said production could be disrupted if American factories were unable to access Canadian-made parts.
The latest development comes as Canada prepares retaliatory tariffs on selected US goods from September 8 in response to Trump’s existing 50% tariffs on about US$20 billion worth of Canadian products.
Some industry executives have also expressed doubts over whether Trump’s latest tariff threat will ultimately be implemented, noting that previous tariff announcements have been delayed or scaled back.
They suggested the proposed January 2027 start date could also give both sides additional time to return to negotiations and reach a new trade agreement.
