U.S.-Canada trade dispute threatens auto industry with higher prices and plant closures
Economists and automakers warn that pending tariffs and an unresolved USMCA review could raise vehicle costs, disrupt supply chains and jeopardize jobs in both countries.
The United States and Canada are locked in a trade dispute that could impose new tariffs on steel, aluminum and possibly automobiles, creating uncertainty for the North American auto sector. President Donald Trump has already enacted a 50% tariff on about $20 billion of Canadian imports, and Canada has responded with matching retaliatory duties. Negotiations on the United States-Mexico-Canada Agreement (USMCA) remain incomplete, leaving the current pact in place only through 2036.
Industry analysts say the measures could push vehicle prices higher for consumers and force manufacturers to absorb additional costs, at least in the short term. > "In the near-term, all of the automakers will absorb the additional costs associated with trade-related changes in the market, but that can’t last for long," said Sam Fiorani, vice president of Global Vehicle Forecasting at AutoForecast Solutions. He added that prolonged tariffs could lead to price increases, reduced model availability and a loss of competitiveness against European and Chinese producers.
Honda, which sources a larger share of its U.S. sales from Canadian plants than the Detroit three, indicated it may need to raise prices if a new trade deal is not reached. > "We may have to raise prices if the United States can't reach a new trade deal with Canada," said Honda executive vice president Noriya Kaihara at a news roundtable.
Data compiled by Edmunds shows that 20.9% of Honda's U.S. sales come from Canadian-built vehicles, compared with 13.7% for Toyota and less than 6% for Ford, GM and Stellantis. The automakers declined to comment on the potential impact of higher tariffs.
The American Automotive Policy Council, representing the Detroit manufacturers, issued a statement urging negotiators to reach an agreement that would enhance North American auto competitiveness.
Experts caution that prolonged trade friction could lead to plant closures and job losses in Michigan, Ontario, Ohio, Indiana and Wisconsin, and could weaken the region’s ability to compete globally.