Canada-U.S. tariffs add pressure to automotive supply chains

Canada and the United States are imposing or maintaining several tariffs that could increase costs for vehicle manufacturers, parts suppliers and aftermarket businesses on both sides of the border.

Effective today (Sept. 8), Canada imposed matching counter-tariffs of 15 per cent, 25 per cent or 50 per cent on US$27.6 billion of American goods. Automotive-related measures include a 50 per cent tariff on targeted U.S. steel and aluminum products and 25 per cent tariffs on specified tools, plastics and electronics. These materials and products are widely used in vehicle production, repair equipment and replacement parts. Canadian companies unable to obtain affected inputs domestically or from non-U.S. suppliers may apply for exceptional tariff relief.

Canada will also continue its existing 25 per cent tariff on non-Canada-U.S.-Mexico Agreement (CUSMA)-compliant vehicles imported from the United States. For CUSMA-compliant U.S. vehicles, the 25 per cent tariff applies only to content originating outside Canada and Mexico. The Canadian schedule also retains 25 per cent tariffs on certain U.S. automotive products, including windshields and other vehicle glass, retreaded passenger and commercial-vehicle tires, used vehicle tires, and specified motorcycles.

In the opposite direction, the United States has imposed a 50 per cent Section 338 tariff on specified Canadian goods in response to what it characterizes as discriminatory Canadian treatment of U.S. motor vehicles. Products already covered by separate U.S. Section 232 tariffs—including automobiles, designated automotive parts, steel and aluminum—are excluded from that additional 50 per cent tariff rather than being charged twice under both programs.

Canadian-built vehicles entering the United States remain subject to a separate 25 per cent automotive tariff. For vehicles qualifying under CUSMA, the 25 per cent charge applies only to the vehicle’s non-U.S. content. The U.S. automotive-parts tariff covers designated engines and engine parts, transmissions, powertrain components and electrical components; qualifying CUSMA parts remain exempt until the United States implements a system for taxing only their non-U.S. content.

Canadian steel and aluminum exports also face U.S. Section 232 tariffs. The general rate is 50 per cent on covered primary metal products, 25 per cent on many derivative products and 15 per cent on certain industrial machinery and power equipment. Special treatment can apply to qualifying Canadian products, including a 25 per cent tariff calculated on non-U.S. content—subject to a minimum effective tariff of 15 per cent—for certain products covered by the June 2026 adjustment.

The measures increase costs in both directions: Canadian assemblers and repair businesses may pay more for U.S. metals, equipment and components, while U.S. manufacturers importing Canadian vehicles, metals or parts face higher input costs. Because automotive components frequently cross the border multiple times during production, even tariffs aimed at raw materials can compound throughout the supply chain.