Automakers thought Canada was getting a trade deal. Then tariffs doubled

By Nora Eckert and David Shepardson

DETROIT, Aug 26 (Reuters) - ‌Just last week, automakers ​were hoping summer ​U.S.-Canada trade talks would deliver relief from Washington's 25% tariffs that have raised the cost of shipping vehicles and parts across the border.

Instead, their problem got twice as bad on Monday, when U.S. President Donald Trump declared a 50% levy on ‌vehicles, auto parts and trucks from Canada, effective on January 1.

"We cannot end up in a place come ⁠January next year where Canada — a major market for U.S.-made vehicles and parts and whose vehicle exports contain significant U.S. content — is being treated like China," one industry executive ‌told Reuters. The planned 50% tariffs on Canada ‌would rival the levies currently in place on some gasoline-fueled cars imported from China.

The trade deal that fell apart would have cut the top-line tariff rate on Canadian cars and light-duty trucks from 25% to 15%.

Canadian-built vehicles accounted for only about 6% of U.S. sales in ​2025, according to Barclays. Still, if the current tariffs double, automakers including Ford Motor, General Motors, Jeep-maker Stellantis, Toyota and Honda would face significant added costs on some of their most important models. And a higher levy on parts would inflict pain across the U.S. ⁠automotive supply chain.

Some auto-industry sources who spoke to Reuters said they were hopeful a deal would still be resolved before January, and that the deadline being months signals that the sides are ​leaving room to reach a deal.

UNEVEN PLAYING FIELD

Even before the talks blew up, Detroit auto executives had been pressing their case to the administration that Trump's gauntlet of tariffs over the past 18 months had left ​them in a worse position than Asian and European rivals.

Tariffs on imports from ‌those markets stand at 15%, thanks to separate trade deals struck last year with those partners. Yet Trump's levies have remained 25% on Detroit automakers’ biggest trading partners, Mexico and Canada, with some relief on the value ⁠of their U.S. content.

The administration also has floated the idea of requiring imported cars from Canada and Mexico to have half their content come from U.S.-made parts in order to qualify for lower tariffs, people familiar with the plan have said. Imports from Asia and Europe face no such U.S. or North American content ⁠requirements.

This week, auto industry lobbyists said they are puzzled about why Washington is effectively boxing out Canada, a country whose automotive supply chain is deeply intertwined with the ​U.S.

Honda and Ford did not immediately respond to requests for comment. Toyota, GM and Stellantis declined to comment. The American Automotive Policy Council, which represents Ford, GM and Stellantis, didn't immediately respond to a request for comment.

GM PICKUPS, TOYOTA SUVS AT RISK

For GM, about 17% of its Chevrolet Silverado pickup-truck production – its top-selling model – ‌is in Canada, according to research from Barclays. For Stellantis, Canada is the sole manufacturing site for its Chrysler Pacifica, one of its top-selling U.S. models. Ford is set to start importing Super Duty large trucks ‌from a plant in Oakville.

Toyota and Honda would be most exposed to the higher tariffs. According to Global Automakers of Canada, the two Japanese automakers accounted ⁠for more than 75% of the 1.2 million vehicles produced ‌in the country in 2025, and many ​of those were shipped to the U.S.

A senior Honda executive warned on Tuesday that the automaker might not build an eighth assembly plant in North America unless the U.S.-Mexico-Canada Agreement is extended.

(Reporting by Nora Eckert. Editing by Mike Colias ‌and David Gregorio)

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