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Tariffs Take Their Toll
The trade relationship between the U.S. and Canada has been under strain since the Trump administration imposed higher import tariffs. This has affected several automakers, including Stellantis, which, according to Unifor, is now considering selling its Brampton Assembly Plant. The Ontario factory was originally slated to produce the next-generation Jeep Compass, but U.S. tariffs complicated the business case, and production was moved to Illinois.
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Now, another conflict has emerged between the North American neighbors after trade talks fell apart at the last minute. Bloomberg reported that new 50% tariffs on roughly $20 billion worth of Canadian goods have taken effect, with Canadian Prime Minister Mark Carney planning to retaliate.
Negotiations Took a Wrong Turn
Both sides blamed each other for the breakdown. The U.S. said last-minute demands from Canadian negotiators derailed a draft agreement that had taken days to assemble, while Canada claimed the U.S. had changed its position, saying, “Last-minute changes in the US proposed terms were unfair, uneconomic, and called into question the reliability of any deal.”
The U.S. has not detailed how it would respond to Carney’s retaliation. For now, its new tariffs – covering Canadian imports including plywood, liquor, electrical equipment, and hockey gear – took effect Aug. 22.
The two countries had discussed a deal that would lower tariffs on some Canadian steel and aluminum to 25%, cut duties on Canadian-made vehicles to 15%, and eliminate the 10% lumber tariff. However, the U.S. said negotiations ended when Canada sought additional concessions, without specifying what they were.
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Lower duties on Canadian-made vehicles exported to the U.S. would have reduced costs for dealers and automakers. They would not necessarily have lowered sticker prices, but the deal could have reduced pressure for price increases and helped preserve cross-border production and sales. After all, several mainstream models are built in Canada, including the Toyota RAV4 Hybrid, Honda CR-V, and Chevrolet Silverado.
Tariff for Tariff
Canada is threatening dollar-for-dollar retaliation against the new U.S. tariffs. Carney also promised additional measures to support Canadian workers and businesses.
Beyond the broader trade dispute, the U.S. has criticized Canada for allowing up to 49,000 Chinese-made EVs annually at a reduced 6.1% tariff. The agreement could give automakers such as BYD and Geely a greater foothold near the U.S. market, while allowing Tesla to offer lower-priced Shanghai-built models in Canada.
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