Proposed U.S. tariffs on Canadian imports could disrupt auto supply chains and raise vehicle costs.
About 50% of vehicles sold in Canada come from U.S. manufacturers, impacting pricing and availability.
GM Canada’s president considers Canada’s 2026 EV sales target unrealistic amid declining incentives.
General Motors Canada’s President Kristian Aquilina has warned that proposed tariffs by U.S. President Donald Trump could negatively impact American economic interests by disrupting automotive supply chains and increasing prices for consumers. Trump has previously threatened a 25% tariff on imports from Canada and Mexico but has held off on immediate implementation while his administration reviews trade relationships.
Aquilina stated that such tariffs would cause disruptions across the North American auto industry, which has been built around the free flow of goods between the three countries. “It is a disruption that is in no one’s interest, especially in the U.S.,” he said.
Canada-U.S. Auto Trade at Risk
According to the Trillium Network for Advanced Manufacturing, Canada is a significant buyer of U.S.-made vehicles. Approximately 50% of vehicles sold in the country in 2023 were sourced from American manufacturers. Additionally, the U.S. accounts for 65% of Canada’s auto parts imports, while Mexico provides 14%.
According to Statistics Canada, Canada recorded a C$40 billion ($27.7 billion) trade deficit in motor vehicles and parts with the U.S. in 2023, the largest single category of imports. Canadian officials have signalled they are prepared to impose counter-tariffs if the U.S. moves forward with duties, potentially making U.S. vehicles more expensive for Canadian buyers.
Industry Response and Business Planning
Aquilina indicated that GM Canada is preparing to respond to potential tariffs but emphasized that the extent of necessary adjustments remains unclear. “We are going to size that up, whether it’s January 21 or later, and work out the best response,” he said.
If tariffs are imposed without exemptions, they are expected to increase the cost of vehicles and parts exchanged between the countries. Additionally, the recent depreciation of the Canadian dollar, which has fallen by approximately 4.5% since the U.S. election, is already contributing to higher costs for Canadian buyers.
Electric Vehicle Policy Challenges
Aquilina also addressed concerns regarding Canada’s electric vehicle targets, calling them “unrealistic.” The federal government has set a goal of 20% of new light-duty vehicle sales being zero-emission by 2026 and a full transition to electric vehicles by 2035. He suggested that the lack of sustained price reductions and incentives could hinder EV adoption.
In 2023, GM sold 294,000 vehicles in Canada, with electric models accounting for 14% of total sales. The company employs around 8,000 people in Canada.
Uncertainty Surrounding U.S. Trade Policy
While Trump has yet to impose tariffs, his administration has directed federal agencies to review trade deficits and supply chain dependencies with key trading partners, including Canada. The potential tariffs, which could take effect as early as February 1, are part of broader efforts to address trade imbalances and concerns related to illegal immigration and fentanyl trafficking.
The announcement that tariffs would not be imposed immediately led to a rally in global markets and a decline in the U.S. dollar against major currencies.
Aquilina emphasized the need for a stable and predictable trade environment to maintain the North American auto industry’s competitiveness.
Source: Bloomberg
