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So, how about this tariff war, huh? According to the official website for the Government of Canada, they’re “imposing 25% tariffs on imports of certain goods from the US, including steel and aluminum products and auto imports,” with the country’s Border Services Agency collecting the tariffs in the form of a surtax. So we’re paying extra to buy stuff from Canada, and Canada is paying extra to buy stuff from us.

Or at least, that’s how it works in theory. In practice, we’re going to wind up looking for ways around those extra charges, especially when it comes to something as expensive as a brand-new Kia K5. For Canada, that means buying cars, trucks, and SUVs not from the US, but from Mexico. And we’re not talking about a few hundred sedans and several dozen pickups, but billions of dollars worth of business.

We’re Losing Around A Billion Dollars A Month

Mexico makes a lot of cars for their own domestic market, but they also make a lot of cars for the US. We’re their closest neighbors, after all, and we’ve been the biggest importer of Mexican-built vehicles for 30 years. That all changed just last June, when Canada became Mexico’s biggest buyer. That’s worrying, because Canada used to buy all their imported cars from the United States. So every dollar they’re not spending here, they’re spending down south.

According to a report from Bloomberg, Canada spent $1.08 billion CAD on imports from Mexico in June, compared to $950 billion on imports from the US, a shift that hasn’t happened in three decades.

If you think a trade loss of around one billion dollars a month adds up quick, you’re right. In 2024, Canada bought $23.2 billion worth of cars from the United States, and we were averaging $2.5 billion a month in sales one year ago.

Nearly Half Of Canada’s Favorite Cars Are American-Made

Ford

Canada’s sprawling highway system and dense urban areas create a driving environment not so different from our own here in the US, and a list of the country’s favorite cars, trucks, and SUVs looks a lot like ours…

Now, here’s why we bring it up…

• Canada has been buying its Ford pickups primarily from our facilities here in Michigan and Missouri
• Canada’s Ram 1500s come from Michigan.
• Canada has bought a lot of its Nissan Rogues from Tennessee in the past.
• Canada’s Ford Escapes have historically come from the plant in Louisville, Kentucky.
• Four of Canada’s 10 favorite vehicles have been manufactured primarily in the United States.

Historically, we’ve bought a handful of cars from Canada, too. The Dodge Challenger and Charger, the Ford Edge, the Chevy Equinox, and the Honda Civic have all been built up north for sale in the United States. Ultimately, we’re suffering more for not being able to sell to Canada than we are for not being able to buy from them, though, as we produce more than 10 million cars a year to Canada’s two million and change automotive output.

How Can We Expect Automakers To Adjust To The New Normal?

Ford

Right now, some of the long-term effects of the tariff war are unclear.

To take one example, Ford seems to have its hands tied, having lost hundreds of millions of dollars in business in Q1 alone. In 2024, the automaker announced plans to start manufacturing F-Series trucks in Canada, and we should see the first Oakville, Ontario pickups rolling off the line in 2026. But, at last report, the plan was to build Super Dutys, not F-150s. At present, Mexican F-150s are actually built in the US, and sold in Mexico as the Ford Lobo. Mexico still produces other models like the Ford Maverick, but not the most popular pickup in the world. For the time being, if Canada wants F-150s, then American-made trucks are the only way to go.

Canada has been importing Model Ys from the Gigafactory in Germany to get around tariffs for both US and Chinese imports. Canada actually charges a 100% surtax on Chinese EVs, just so you know that these tariff wars aren’t exclusively a United States thing.

Some of Canada’s hybrid RAV4s are imports from Kentucky, but the country has its own Toyota facilities, and Canada imports directly from Japan, as well. Subaru has been shipping to Canada directly from Japan, rather than the Indiana plant, and Mazda simply dropped the Canadian CX-50 altogether so they don’t have to worry about it.

Remember that it’s not just the cars themselves being tariffed. We also supply steel and aluminum parts to Canadian automotive plants. But now, just like the Ford Maverick, the Bronco Sport, and the Jeep Compass, all built in Mexico for the Canadian market, Canada will be importing everything from door handles to rear axles from down south in order to get around the higher costs. All told, the total loss in business will be incalculable until the dust settles.

This Is History Repeating Itself All Over Again

Stellantis

One reason to study history: you learn that hard times don’t last. We’ve been through this tariff war game with Canada before, and we’ve always come out as strong trade partners on the other end.

In the early 1960s, we were going tit-for-tat with our neighbors up north, ultimately resulting in the signing of the Canada-United States Automotive Products Agreement, or the Auto Pact, which removed the tariffs affecting the industry and driving car prices up in Canada. In 1988, Ronald Reagan’s Canada-United States Free Trade Agreement would phase out tariffs that had been signed into action since then. And then you had NAFTA, going into effect in 1994, aiming to eliminate trade barriers between Mexico, Canada, and the US.

Whether to increase support for domestic product or to “send a message” to our trade partners, history has no shortage of lawmakers and political leaders establishing tariffs against our closest trade partners, and no shortage of leaders and lawmakers looking to make a name for themselves by striking those tariffs down.

We’ll Be Feeling The Squeeze For A While

Tesla 

We’re definitely going to lose business in the short term. Bloomberg has reported a series of layoffs and spending cuts as a direct result of these tariffs, and we’re seeing production pauses at various manufacturing facilities. The long-term fallout remains unclear at present.

Many of Trump’s tariffs have been ruled illegal, according to the US appeals court, and many businesses could even be owed refunds, but, first of all, the ruling doesn’t apply to all the tariffs affecting the automotive industry. Secondly, we’ll have to see what happens as the case goes to the Supreme Court before we can say that the matter has been settled. And finally, US courts can only determine the legality of US tariffs. Canada’s tariffs may remain in place until Canada’s lawmakers decide they’re ready to do business with us again.

Sources: Government of Canada, Bloomberg.