Trump-Carney trade war highlights an auto sector that was already structurally weakening in Canada

Canada and the US are embroiled in a trade war. After talks broke down, Washington announced that tariffs on Canadian cars, trucks, automotive parts and steel will rise to 50%. Other duties were applied immediately, triggering matching retaliatory tariffs from Ottawa.

The dispute threatens the long-term viability of one of Canada’s most important industries. Ford Motor Co., General Motors and other multinationals operate factories in Ontario that are part of an integrated continental supply chain; parts can cross the Canadian, US and Mexican borders multiple times before a vehicle is complete.

A look at longer-term trends reveals that an automotive structural rebalancing was underway across North America long before the current crisis – perhaps due to signals from Trump’s 2017-21 term, as well as the global rise of electric vehicles (where North America has been a laggard).

United Nations Comtrade data shows how Canada’s historic trade surplus with the US in this sector has inverted to a structural deficit. Meanwhile, Canadian imports of American automotive goods have largely held steady since 2016.