This week saw the White House announce a fresh round of tariffs focused on the automobile industry. These globally applied tariffs present a stark challenge for North America’s highly integrated automotive sector.
To Recap the Week
On March 24,, 2025, the U.S. Administration announced it would place a 25% tariff on all imports from any country that buys oil or gas from Venezuela. In 2024, Canada (via data from the Government of Canada’s Trade Data Online) imported approximately $30,800,209 in goods from Venezuela. Oil products do not appear in the top 25 imported products, which account for 99.3% of Canadian imports from Venezuela.
Two days later, on March 26, 2025, the White House announced a 25% tariff on auto imports beginning on April 3, 2025. Per the published proclamation, this tariff finds its origin in a February 2019 report from then US Secretary of Commerce Wilbur Ross. Secretary Ross reported that “automobiles and certain automobile parts are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States” per Section 232 of the Trade Expansion Act of 1962 as amended (19 U.S.C. 1862) (Section 232).
The White House’s fact sheet on the March 26, 2025 Proclamation notes three particularly relevant points in consideration of the integrated North American automotive manufacturing sector.
- The 25% tariff will be applied to imported passenger vehicles (sedans, SUVs, crossovers, minivans, cargo vans) and light trucks, as well as key automobile parts (engines, transmissions, powertrain parts, and electrical components), with processes to expand tariffs on additional parts if necessary.
- Importers of automobiles under the United States-Mexico-Canada Agreement will be given the opportunity to certify their U.S. content and systems will be implemented such that the 25% tariff will only apply to the value of their non-U.S. content.
- USMCA-compliant automobile parts will remain tariff-free until the Secretary of Commerce, in consultation with U.S. Customs and Border Protection (CBP), establishes a process to apply tariffs to their non-U.S. content.
As reported by CTV News on March 27, 2025, Canada’s vehicle exports totaled $51 billion in 2023, and 93% of exports were shipped to the United States.
Prime Minister Carney is expected to speak with the American president on March 28, 2025. The Prime Minister is also expected to meet with provincial and territorial leaders at noon on Friday the 28th to discuss automotive tariffs. At the time of this publication, details on both meetings were developing.
What’s Next
April 2,2025 remains a significant date in Canada’s economic relationship with the United States, as United States “reciprocal” tariffs are expected to begin on that day. Per the CBC, these tariffs are expected to be based on the extent to which a country applies tariffs to goods produced in the United States. The full extent of these tariffs, including the extent to which they will overlap with announced automotive tariffs remains unclear at this time.
An additional unknown consideration is the extent to which CUSMA-compliant automobile parts may face additional tariffs in the coming months.
In the Meantime
A suite of programs are available to provide support to Canadian businesses during this time. These programs include:
- On April 15, 2025, Innovation Factory is hosting a discussion with Sue Rauth of the Federal Trade Commissioner Service on navigating the impacts of U.S. tariffs. Registration is available through this link.
- Export Development Canada’s Trade Impact Program. Starting this year, this program mobilizes $5 billion over two years to help exporters reach new markets for Canadian products.
- Business Development Bank of Canada makes $500 million in favourably priced loans available to support impacted businesses in sectors directly targeted by tariffs and companies in their supply chains.
- $1 billion in new financing through Farm Credit Canada to reduce financial barriers for the Canadian agriculture and food industry.
- Temporary flexibilities to the Employment Insurance Work Sharing Program, which helps avoid layoffs when there is a temporary decrease in business activity.
- Canada Small Business Financing Program offers a maximum loan of $1.15 million to small businesses and start-ups in Canada with revenue of less than $10 million.
Where a manufacturing company can not source inputs through domestic markets, the Government of Canada has created a remission request program to provide support on Canadian counter tariffs.
For companies seeking to diversify their trade relationships, consider meeting with a member of the Federal Trade Commissioner Service. The Trade Commissioner Service can help Canadian companies access Canada’s 15 free trade agreements with 51 countries worldwide. Please feel free to connect with Economic Development staff, who can offer a first point of introduction to the Trade Commissioner Service.