How is the USA tarrif going to impact Canadian automotive market?

The new 25% U.S. tariff on automotive imports is driving up car prices in Canada and causing supply chain disruptions. Here's what you need to know:

• New car prices in Canada: Increased by about $2,000 on average since 2024, with luxury SUVs and pickup trucks seeing over 10% price hikes.

• Used car market: Higher demand has pushed prices up due to fewer trade-ins and limited supply.

• Supply chain issues: Canadian auto parts cross the U.S. border multiple times, and the tariff adds significant costs at each step.

• Economic impact: Canada's GDP could shrink by up to 1.3%, and Ontario may face a mild recession.

• Job risks: Production cuts could threaten up to 900,000 units annually and thousands of jobs.

Consumers are advised to explore financing options, consider used vehicles, and time purchases carefully. Dealers and manufacturers are adjusting by sourcing from tariff-free regions, boosting domestic production, and leveraging government support. The Canadian government is also taking steps to stabilize the industry and protect jobs. Get the best price on used vehicle here! https://apply.hellomotors.ca/

Mexico Fights Back, Canada Joins In – Even the U.S. Didn’t ...

Price Changes in Canadian Market

The introduction of U.S. tariffs has caused shifts in both new and used vehicle prices in Canada. These shifts stem from higher costs for new vehicles due to tariffs and counter-tariffs, which have also driven up demand - and prices - in the used car market.

New Car Price Increases

Rising manufacturing and import costs have bumped up average transaction prices by about $2,000 between 2024 and early 2025 [1]. U.S.-built vehicles face added costs from both U.S. export tariffs and Canadian counter-tariffs on $155 billion worth of U.S. imports [1].

Price hikes differ across vehicle categories:

Experts at the Center for Automotive Research explained:

"Higher new car prices will drive some consumers into the used vehicle market where prices will also be higher due to heightened demand and constricted supply" [1].

As new car prices climb, more buyers are turning to used vehicles. Get the best price on used vehicle here! https://apply.hellomotors.ca/

Used Car Market Changes

The spike in new vehicle costs has pushed more buyers toward the used car market, especially for SUVs and pickup trucks. This increased demand, coupled with fewer trade-ins and higher costs for U.S.-sourced vehicles, has driven up prices in the used market as well.

Canadian dealers and automakers have tried to absorb some of these added costs to stay competitive. However, the combined impact of U.S. tariffs and Canada’s counter-tariffs continues to strain affordability for consumers.

Supply Chain Effects

U.S. tariffs are disrupting Canada's auto supply chain, leading to higher costs and delays.

Border Crossing Delays and Costs

North American auto manufacturing depends heavily on components crossing borders multiple times. In 2023, Canada and Mexico accounted for 58% of U.S. auto parts imports and 76% of exports [3]. The newly imposed 25% tariff has made cross-border operations more challenging.

Here’s a snapshot of the impact:

"At 25%, absolutely nobody in our business is profitable by a long shot." – Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association [5]

The Auto Care Association has emphasized that these rising costs are ultimately handed down to consumers:

"The tariffs are not paid by exporting countries, but the additional costs are passed on directly to U.S. consumers, which could lead to increases in the prices of vehicle repairs and maintenance, an even heavier burden in times of high inflation." [3]

These delays and higher costs are forcing Canadian plants to rethink their strategies. Get the best price on used vehicle here! https://apply.hellomotors.ca/

Changes to Canadian Auto Plants

Canadian auto plants are adjusting their operations to deal with cross-border disruptions. Stellantis, for instance, temporarily halted operations at its Windsor, Ontario plant in response to the tariffs [2].

The situation is particularly challenging because:

• The U.S.-Canada-Mexico auto supply chain is deeply interconnected [1].

• Over 70% of U.S. auto parts exports go to Canada and Mexico [1].

• The 25% tariff has made many components either too expensive or difficult to obtain [1].

To address these hurdles, plants are taking several steps:

• Boosting domestic production and sourcing

• Finding suppliers outside tariff-affected regions

• Streamlining production methods

• Working with government programs to offset costs [1]

These measures are essential as industry experts caution that continued tariffs could lead to more plant closures [2], impacting not just manufacturing but also vehicle repair and maintenance schedules [3].

Jobs and Economic Results

The tariffs are creating serious concerns about job losses and economic stability, alongside supply chain issues and rising costs. A 25% tariff could lead to production cuts of up to 900,000 units from Canada's annual output of 2.2 million, putting jobs in key manufacturing regions at risk [7]. These potential cuts highlight the possibility of broader trade and economic challenges.

Ontario Premier Doug Ford stressed how interconnected the issue is:

"Very clear message. President Trump -- these parts go back and forth across the border seven, eight times. One of these car companies go down, it will shut assembly lines down on both sides of the border. This whole tariff nonsense with Canada, it's the craziest thing I've ever, ever seen." [6]

His comments underline the growing worry about job security and the overall impact on the economy.

Trade and Economic Impact

Avery Shenfeld, chief economist at CIBC Capital Markets, weighed in on the gravity of the situation:

"If what we've seen thus far doesn't constitute an all-out trade war in North America, hitting Canadian autos and parts with heavy U.S. tariffs, and the likely retaliatory response from Ottawa, would surely get us there." [7]

Projections indicate that Canada's GDP could shrink by 0.5%-1.3%, with Ontario potentially seeing its economy contract by up to 2%. CIBC analyst Royce Mendes explained, "such a shock would likely throw the province into a mild recession, and depending on the speed at which production tails off, risk one at the national level as well" [7].

Canada's retaliatory measures show its determination to protect its industries, but the long-term economic effects remain a serious concern.

Solutions for Buyers and Sellers

With tariffs reshaping the Canadian automotive market, both buyers and sellers are seeking ways to adapt. The focus is on maintaining affordability and keeping the market sustainable. Get the best price on used vehicle here! https://apply.hellomotors.ca/

Buyer Options and Financing

As vehicle costs rise, buyers are exploring alternative strategies. Sean Mactavish, CEO of Autozen, highlights the trend:

"New car prices go up. People look into used cars, and then that increase in demand drives the prices up for used vehicles." [6]

To help buyers manage these higher costs, Hello Motors offers a range of financing options:

As buyers adjust their financing strategies, dealerships are also adapting their inventory practices to align with the market's shifting demands.

Dealer Inventory Management

Dealers are taking proactive steps to address inventory challenges. These include sourcing more used cars through trade-ins and auctions, focusing marketing efforts on readily available models, and working with manufacturers to secure vehicles from locations unaffected by U.S. tariffs, such as Mexico. These measures help dealers maintain stock levels and manage pricing pressures.

Government Response Options

The Canadian government has introduced measures to stabilize the automotive sector. Deputy Prime Minister Chrystia Freeland emphasized the country’s strengths:

"Canada is home to the talented workers, raw materials, clean electricity, and specialized production capabilities needed to build electric vehicles, and that is why our EV supply chain potential is ranked first in the world. Canadian workers and critical sectors, including steel and aluminum, however, are facing a state-directed policy creating overcapacity, undermining Canada's ability to compete in domestic and global markets. That is why our government is moving forward with decisive action to level the playing field, protect Canadian workers, and match measures taken by key trading partners." [9]

Government initiatives include tariff remission processes for qualified importers, programs to boost domestic manufacturing, and efforts to support over 125,000 jobs in the auto manufacturing industry.

Minister François-Philippe Champagne also emphasized the importance of government action:

"The auto supply chain in Canada supports nearly 550,000 direct and indirect jobs, and automotive is one of the country's largest export industries. We're securing the fair, prosperous future Canadians deserve by imposing tough tariffs and making sure our workers, from the steel to the auto sector to various key manufacturing sectors, have the flexibility they require to stay competitive. That's how we'll protect our industries, secure jobs, support communities and keep building the products Canada, and its partners, need." [8]

Conclusion: Next Steps for Canadian Auto Market

Supply chain issues and economic challenges have shaped the future of the Canadian auto market, requiring clear strategies to navigate what's ahead.

U.S. tariffs could drive vehicle prices up by as much as $10,000, putting pressure on Canadian buyers to carefully time their purchases and remain flexible. Industry leaders have repeatedly stressed just how disruptive these tariffs can be.

Here’s how different stakeholders are adjusting to these challenges:

These adjustments by consumers, dealers, and manufacturers are laying the groundwork for government actions aimed at long-term stability. Deputy Prime Minister Chrystia Freeland has emphasized Canada's efforts to secure its EV supply chain and manufacturing base, setting the stage for a more stable future.

Manufacturers like GM are also stepping up, using balanced production strategies to adapt to changing consumer demands. With government backing and these focused strategies, the industry is better positioned to protect jobs, stabilize prices, and support the broader economy. Get the best price on used vehicle here! https://apply.hellomotors.ca/