In a strategic move to balance local jobs and international trade, Canadian Prime Minister Mark Carney has announced that automakers can import US-made cars and trucks without tariffs—but only if they keep their production plants active in Canada.
The decision is aimed at protecting Canada’s auto sector amid rising tensions due to Donald Trump’s retaliatory tariffs on foreign-made vehicles, including those from Canada.
“Our counter-tariffs won’t apply if they continue to produce, continue to employ, and continue to invest in Canada,” Carney said at a news conference.
Automakers Feeling the Heat
The announcement comes just a week after Canada matched the US with 25% retaliatory tariffs on American cars. The pressure has already been felt by manufacturers:
- Stellantis has temporarily shut down its Windsor plant (maker of Chrysler and Dodge vehicles).
- General Motors is set to pause operations at its EV van plant due to weak demand.
- Ford’s Toronto-area plant remains idle.
- Honda is reportedly considering moving production to the US to meet its goal of producing 90% of US sales domestically.
However, Honda has publicly denied any imminent plans to shift Canadian operations. “The plant will operate at full capacity for the foreseeable future,” a Honda spokesperson said.
What the Policy Means for Automakers
Carney’s plan is a “tariff-for-production” deal:
- Automakers can avoid tariffs on US imports if they maintain or grow their manufacturing footprint in Canada.
- If they reduce local operations, their tariff-free quota will shrink, said the Finance Department.
This move aims to protect the Ontario auto belt, home to major manufacturing hubs for GM, Stellantis, Honda, and Ford.
A Campaign Strategy with Billions at Stake
With Canada’s national election on April 28, Carney has framed the tariff issue as part of his broader economic platform. He has proposed a C$2 billion fund to strengthen the Canadian auto supply chain and signaled plans to negotiate directly with Trump.
His political rival, Conservative Leader Pierre Poilievre, also promises to negotiate on tariffs and has proposed removing the federal sales tax on Canadian-made cars.
Temporary Tariff Relief on Essential Imports
The government is also offering a six-month tariff break on select US imports, including:
- Steel and aluminum inputs for Canadian manufacturing
- Packaging materials used in food and beverage industries
- Public health and safety goods like hospital equipment and firefighting tools
These exemptions aim to support Canadian businesses and institutions that rely heavily on US supply chains.
