Trade ministers Dominic LeBlanc and Jamieson Greer are meeting in Washington to settle a range of disputes ahead of a midnight Friday cutoff, with the automotive sector emerging as a flashpoint. Sources indicate the prospective agreement would lock in a 15 % duty on Canadian‑built vehicles, a figure that experts warn would render local production unprofitable and trigger a slowdown in plant investment.
Tariff proposal details
The draft deal under discussion would cut the US tariff on the American‑made portion of Canadian‑assembled cars from 25 % to 15 %, while removing the exemption Canada had sought for domestic and Mexican content. Because roughly half of a vehicle assembled in Canada originates in the United States, the effective duty on the finished product would fall between 6 % and 8 %.
That range mirrors both typical assembly labour costs and the average profit margin on a car, which industry analysts place at 6‑8 %. Consequently, the levy would erase profitability and saddle manufacturers with extra expenses that could not be absorbed without passing costs onto consumers or cutting back on spending.
Industry experts warn of investment slowdown
Automotive specialists argue that a 15 % tariff would push carmakers to reconsider upgrades or new model launches in Canada. Greig Mordue, an engineering professor at McMaster University and former Toyota Canada general manager, put it bluntly:
> “None of these carmakers are non‑profit enterprises and so over the longer term, they’ll start to look at Canada and think, ‘where can we make more money?’ ”
Peter Frise, an automotive engineering professor at the University of Windsor, echoed the concern, noting that the proposed rate dwarfs typical industry returns:
> “It can’t be seen as a positive thing,” Prof. Frise said. “In an industry where profit margins are typically 6 to 8 per cent, 15 per cent is a lot.”
He added that the duty would raise vehicle prices for buyers in Canada, the US and Mexico while discouraging fresh capital expenditure at Canadian factories.
Historical context and past impacts
The current negotiations follow a series of protectionist moves by the Trump administration. Last year, President Donald Trump imposed a 25 % duty on Canadian‑made automobiles under Section 232 of the 1962 Trade Expansion Act, sidestepping the United States‑Mexico‑Canada Agreement. He also levied 50 % tariffs on imported aluminium and steel, further inflating input costs for US manufacturers.
According to the Anderson Economic Group, those auto tariffs on Canada and Mexico cost US consumers and businesses an estimated US$12.5 billion in 2025—a figure that does not include penalties on steel, aluminium or other goods. Patrick Anderson, the consultancy’s chief executive, cautioned that the financial burden could shift depending on the outcome of the latest talks:
> “That’s a burden that could fall or rise based on the results of this latest trade drama,” said Patrick Anderson.
Trump has also signalled a willingness to raise duties to 50 % on a broader range of Canadian imports if no agreement is reached by the Friday deadline, a threat he has repeatedly framed as a lever to reshore manufacturing and exert pressure on Ottawa.
What lies ahead for the Canadian auto sector
Ontario hosts assembly lines for five major manufacturers—Honda, Toyota, Stellantis, General Motors and Ford—collectively responsible for about 90 % of their sales in the United States. The province’s auto workforce numbers roughly 105,000, according to the Canadian Vehicle Manufacturers’ Association.
Recent tariff pressures have already prompted strategic shifts: Honda shelved a $15 billion electric‑vehicle project, Stellantis relocated planned Jeep output from its idle Brampton plant to Illinois, General Motors shuttered its electric‑van facility in Ingersoll and trimmed shifts at its Oshawa truck plant, while Toyota and Honda have kept Canadian output steady despite calling the existing duties unsustainable.
Looking forward, Toyota aims to double the size of its San Antonio, Texas, facility by 2030, and Honda is reportedly scouting a new North American site that analysts expect will be situated in the United States. As Greig Mordue observed, moving production to an existing US plant with spare capacity can be accomplished in about six months, whereas constructing a fresh factory stateside typically takes two or three years.
> “It doesn’t augur very well for Canada if it’s 15 per cent minus U.S. content,” he said. “I completely get that a deal has to be made because it’s better than 25 per cent minus U.S. content, but over the longer term, it’s probably not sustainable and decisions have to get made.”
Although components made in Canada remain duty‑free, Mordue warned that the long‑term viability of the sector hinges on preserving assembly activity:
> “Although auto parts made in Canada remain tariff‑free, there are doubts much of the industry will survive the loss of assembly plants,” he said. “That’s not to say all of the parts [factories] will disappear. It’s not to say all of the assembly will disappear, but it’s a long‑term challenge.”
Why it Matters
The looming 15 % US tariff on Canadian‑built cars threatens to overturn a delicate profit balance in an industry where margins already hover between 6 % and 8 %. If the duty stands, manufacturers will face a stark choice: absorb the cost and erode earnings, raise prices and risk losing market share, or shift production south of the border where the effective duty is lower. Such a move would not only jeopardise thousands of skilled jobs in Ontario but could also diminish Canada’s role as a hub for automotive innovation and investment, reshaping the North American supply chain for years to come. The outcome of the Washington talks will therefore determine whether Canada can retain its automotive base or watch it migrate elsewhere in pursuit of sustainable profitability.