Just hours before it was set to take another tariff hit from U.S. President Donald Trump, the Canadian automotive industry breathed a partial sigh of relief, but industry executives, economists and union officials warned that tens of thousands of jobs in this country are still at risk.
New guidance from a U.S. border and customs agency suggests that Canadian automotive parts that follow the rules of the Canada-U.S.-Mexico trade agreement won’t be subject to new import tariffs.
According to the new guidance from U.S. Customs and Border Protection, CUSMA-compliant parts will face a 0 per cent tariff, while others face a 25 per cent rate starting Saturday.
The head of Canada’s Automotive Parts Manufacturers’ Association, however, said jobs and companies are still at risk, thanks to other tariffs imposed by Trump, including levies on cars, steel and aluminum.
“It’s only half of what we need,” said APMA CEO and president Flavio Volpe. “One of the risks has been lifted. Maybe the most severe one, but there are other risks that continue to threaten jobs in the industry.”
Roughly 23,000 workers are directly employed by Ford, Stellantis and GM in Canada. Roughly 4,200 work at Honda Canada’s assembly plant in Alliston, Ont., while 8,500 work for Toyota. The industry also indirectly supports another 100,000 jobs, focused mainly in Ontario.
Volpe said the tariff on cars assembled in Canada means there’s still a threat to parts companies and their workers here, as well as Canadian assembly plants.
“The parts companies will see less production volume,” said Volpe.
The head of Canada’s largest private sector union blasted the guidance as little more than window dressing.
“The guidance issued today by U.S. Customs and Border Patrol changes nothing for the Canadian auto industry. It’s a policy designed to keep U.S. factories running, because they rely heavily on Canadian-made auto parts, while continuing to throttle Canada’s auto assembly plants,” said Unifor national president Lana Payne.
Payne pointed out that a Canadian part put into cars assembled in Canada will still be tariffed.
“The non-U.S. content of every Canadian assembled car shipped south of the border has been, and will continue to be, tariffed at 25 per cent. This is both an unjustified and unwarranted attack on the Canadian auto industry, and Canadian autoworkers,” Payne said.
The new guidance from CBP came just over a day ahead of May 3, when all automotive parts were set to get hit with a 25 per cent tariff imposed by Trump.
A blanket 25 per cent tariff on parts would have spelled chaos for the entire automotive industry in Canada, the U.S. and Mexico, said Jim Stanford, chief economist at the Centre for Future Work.
“Trump isn’t doing Canada any favours here. He’s doing this because he was under a tremendous amount of pressure from American auto manufacturers. They’ve told him they can’t function without Canadian suppliers and Mexican suppliers,” said Stanford. “Clearly, his plan is still to destroy the Canadian auto assembly sector.”
Canadian manufacturing just had its worst month since the height of the global COVID-19 pandemic, according to an index that measures output and new orders.
The head of an industry association representing non-U.S. automakers in Canada said Thursday’s guidance from the U.S. was helpful.
“That’s good news,” said David Adams, president of Global Automakers of Canada. “It would have been very problematic otherwise, come Saturday.”
In a written statement, the head of the association representing American automakers here also liked the idea of no tariff on CUSMA-compliant parts, but said it’s only a partial step.
“We are encouraged to see that CUSMA-qualifying parts are exempt from forthcoming U.S. tariffs,” said Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association. “All CUSMA-compliant automotive trade between Canada and the U.S. should be tariff-free.”
Wednesday, Stellantis said it was pausing production at its Windsor assembly plant for the second time in a month. Beginning Monday, the plant will be on hiatus for a week, although the company said it was to prepare for production of 2026 models.
For months, auto industry insiders had been predicting that a tariff on parts from Canada and Mexico could shut down the North American automotive industry, given how highly integrated the industry’s supply chain is.
A succession of trade agreements, beginning with the Auto Pact signed by Canada and the U.S. in 1965, have pushed the North American auto sector closer and closer together. Some components cross the borders between Canada and the U.S. or the U.S. and Mexico seven or eight times en route from raw material to finished vehicle rolling off an assembly line.
Thursday was the second time this week that Trump’s government has given the U.S. auto industry a break from tariffs. Tuesday, Trump signed an executive order clarifying that auto tariffs and a 25 per cent tariff on parts won’t be “stacked” on top of already-existing import levies, such as those on steel and aluminum. It also said automakers would be able to apply for a rebate of tariffs paid on some imported automotive parts.
But in the order, and an accompanying proclamation, Trump made it clear he’s still aiming to bring as much automotive production to the U.S. as he can.
“It is necessary and appropriate to modify the system of monetary fees and related measures … to more effectively eliminate the threat imports of automobiles and certain automobile parts pose on the national security of the United States,” Trump said in his proclamation.
