President Trump has threatened to increase tariffs to 50% on cars, trucks, auto parts and steel by January 1, 2027.
Firstly, many have speculated that the threats are a negotiating ploy given its long-dated effective date.
We’ve seen outbursts like this in the past that haven’t necessarily led to any change in tariff and trade policy. We’re waiting to see if that does in fact happen.
Notwithstanding, given the reaction of Canadian auto stocks, we thought it’d be worthwhile to refresh ourselves on the auto trade between Canada and the US.
Automotive is one of Canada’s largest manufacturing/export sectors. The auto sector supports >500,000 workers and contributes >$16B annually to GDP.
It was approximately 3% of 2025 national GDP, and isolated to durable goods manufacturing, the auto sector contributed roughly one-third.
Remember that exports drove the upswing in Q2 GDP, contributing to the fastest pace of growth since Q1/23, with passenger car and light truck exports rising 27% sequentially.
If we look specifically at Canada’s exports to the US, autos were 11%, down from 16% pre-pandemic. YTD the trend seems to be continuing, which isn’t surprising given the 25% auto tariffs imposed in 2025.
While the share is declining, the importance of the sector is provincially concentrated as 90% of auto exports to the US come from Ontario. And with almost 150K Ontarians employed by the industry, the noise that’s been coming out of Queen’s Park is understandable.
With everyone on edge - from auto to dairy to energy - we’ll see how this ultimately shapes up given the high stakes that are involved.
