Question Period Note: CANADA’S AUTO SECTOR - IMPACTS OF U.S. TARIFFS

What is the Government of Canada doing to support the Canadian automotive industry considering U.S. tariffs?

• The Government of Canada is committed to maintaining a strong Canadian automotive industry and the well-paying jobs that come with it.
• Automotive trade between Canada and the U.S. is balanced and shows how strong and interconnected our economies are.
• Canada recognizes the challenges that tariffs present to such an integrated industry and has adopted a proportionate response.
• Since April 2025, the government announced a series of strategic measures to support businesses and workers in those sectors most impacted by U.S. tariffs and trade disruptions, including the automotive industry.
• Canada continues to engage with the United States to address its automotive tariffs on Canada.

• Canada responded to U.S. automotive tariffs with reciprocal tariffs of 25% on imports of passenger vehicles and certain trucks from the U.S. This measure mirrors the U.S. approach with respect to Canada-U.S.-Mexico Agreement (CUSMA) rules of origin.
• Because vehicles assembled in Canada contain a significant number of U.S. parts (approximately 50% U.S), the effective tariff rate on Canadian produced vehicles is approximately 12.5%.

• Canada has implemented a measure that allows automakers in Canada to import a certain number of U.S.-assembled, CUSMA-compliant vehicles free of the counter-tariffs, provided that they continue to produce vehicles in Canada and complete planned investments.
• Canada stands ready to work with the United States in a way that strengthens North American automotive production and preserves Canada’s preferential tariff access.

The Canadian automotive sector supports over 125,000 direct jobs, contributed $16.8 billion in 2024 to Canada’s gross domestic product, and is one of the country’s largest export industries. The sector is anchored by the presence of five automotive manufacturers: Stellantis, Ford, General Motors (GM), Toyota, and Honda— that are supported by a diverse supply chain of nearly 700 automotive parts manufacturers across Canada. In 2024, Canada produced over 1.3 million vehicles, ranking 14th globally in terms of vehicle production.

In 2024, automotive trade with the U.S. totalled $152 billion ($75 billion in exports and $77 billion in imports).

On April 3, 2025, the U.S. implemented Section 232 tariffs of :
• 25% on all Canadian vehicles that do not meet the Canada-U.S.-Mexico Agreement (CUSMA) rules of origin; and,
• 25% tariffs on the value of non-U.S. content for vehicles that qualify under CUSMA.

On May 3, 2025, the U.S. imposed tariffs of 25% on non-CUSMA-compliant auto parts under Section 232 of the Trade Expansion Act.

For Canada and Mexico, CUSMA-compliant auto parts are not subject to the 25% tariffs until the Department of Commerce (in consultation with U.S. Customs and Border Protection) establishes a process to apply the tariffs exclusively to the value of non-U.S. content in these parts.

On October 17, President Trump issued a Proclamation to apply a tariff on imports of medium- and heavy-duty vehicles (MHDVs), medium- and heavy-duty vehicle parts (MHDVPs) and buses into the U.S. As of November 1st, imports of MHDVs have been subject to a tariff of 25% on non-U.S. content and 25% on non-CUSMA-compliant MHDVPs. Imports of buses are subject to a tariff of 10%.

Effective April 9, 2025, Canada responded with reciprocal tariffs of 25% against imports of passenger vehicles from the U.S. Canada’s surtax order mirrors the U.S. approach with respect to CUSMA rules of origin.

On April 15, 2025, Canada announced a performance-based remission framework for automakers, designed to incentivize continued production and investment in Canada. The remission framework allows automakers that continue to manufacture vehicles in Canada and/or maintain their investments to import a certain number of U.S.-assembled, CUSMA-compliant vehicles into Canada, free of the countermeasure tariffs that Canada has imposed.

On October 23, 2025, Canada announced significant reductions to the import quotas of General Motors (GM) and Stellantis following their decisions to scale back their manufacturing presence in Canada, directly breaching their commitments to the country and Canadian workers.
On September 5, 2025, the government announced a new series of strategic measures for Canadian industries most impacted by U.S. tariffs and trade disruptions, including automotive. These initiatives will help Canadian businesses retool their production and diversify their products. These new measures include the following:
• A new Strategic Response Fund: The government will invest $5 billion through a new fund with flexible terms to help firms in all sectors impacted by tariffs adapt, diversify, and grow, with support provided to industries by new workforce alliances to align training and workforce needs.

• A new Buy Canadian policy: The government will introduce a new policy to ensure that the federal government buys from Canadian suppliers, requiring local content when domestic suppliers are unavailable, extending this approach to all federal funding streams and Crown corporations, and provides a roadmap for provinces and municipalities to apply similar standards to their own procurement.

• Immediate liquidity relief: The government will expand Business Development Bank of Canada loans for small and medium-sized enterprises (SME) to $5 million, provide more flexible financing through the Large Enterprise Tariff Loan Facility, give the automotive sector flexibility by waiving 2026 model year vehicles from Electric Vehicle Availability Standard requirements, and by launching an immediate 60-day review of these regulations.

• Regional Tariff Response Initiative: The government will expand support to SMEs to $1 billion over three years, with flexible terms, and increase new non-repayable contributions to eligible businesses impacted by tariffs across all affected sectors.