Trump Threatens Higher Auto Tariffs on Canada, Sparks Political and Economic Fallout

U.S. President Donald Trump has once again raised the prospect of escalating tariffs on Canadian automobiles, suggesting his current 25 per cent import duty “could go up” as part of his broader push to bring car manufacturing back to the United States. The comment, made Wednesday from the Oval Office, adds new pressure on Canada’s embattled auto sector and fuels political tensions just days ahead of the Canadian federal election.

“I really don’t want cars from Canada,” Trump told reporters. “They’re paying 25 per cent, but that could go up. All we’re doing is saying, ‘We don’t want your cars, with all due respect — we want to make our own.’” Though he clarified that no increase is imminent, he left the door open for future hikes, reinforcing a pattern of economic unpredictability that has already shaken North American supply chains.

The auto industry, long integrated across Canada, the U.S., and Mexico, has been significantly disrupted by Trump’s tariff policies. Canadian plants have temporarily halted operations, laying off workers as they struggle with shifting supply routes and higher costs. Under the Canada-United States-Mexico Agreement (CUSMA), some vehicles can avoid full tariffs by deducting Canadian and Mexican content, but many parts still face steep duties.

Automakers such as Honda, Volkswagen, and Hyundai have recently doubled down on their U.S. manufacturing investments, moves the Trump administration has pointed to as victories. However, economists warn the tariffs are a double-edged sword. A study by the Center for Automotive Research in Michigan predicts that automakers operating in the U.S. will face an additional US$108 billion in costs in 2025 due to the policy.

Canada has responded with its own 25 per cent counter-tariffs on U.S.-assembled vehicles, though like the U.S., it has offered some exemptions for North American content. Meanwhile, federal party leaders in Canada are scrambling to propose solutions as voters demand protection for jobs and stability in the manufacturing sector.

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Liberal leader and current caretaker Prime Minister Mark Carney has pledged $2 billion in strategic funding for the auto sector and a national manufacturing network focused on Canadian-built vehicles. Conservative leader Pierre Poilievre has proposed a temporary sales tax cut on Canadian-made cars and a $3-billion loan program for tariff-hit industries. NDP leader Jagmeet Singh vowed to stop companies that receive public funding from relocating manufacturing abroad and would mandate government vehicle procurement from Canadian plants.

Despite Trump saying he doesn’t want to interfere with Canada’s election, he did revisit his controversial suggestion that Canada would function better as a U.S. state, arguing that the majority of its trade and economic reliance on the U.S. renders full sovereignty inefficient.

Still, Trump noted “very nice” conversations with Carney and confirmed that both countries have agreed to begin comprehensive negotiations on a new trade and security pact after Canada’s April 28 election. Until then, Canadian officials continue to maintain contact with Washington as businesses and politicians brace for what may come next.