Impact of Tariffs on Canada-US Auto Trade

At the World Economic Forum, President Trump's tough stance on Canada's role in car production could have detrimental effects on the auto industry and consumers.

Integrated Auto Sector

Canada and Mexico play a significant role in the highly integrated North American auto sector. Tariffs on Canadian-made cars and parts would have "deepest negative impacts" due to the interconnected supply chain.

US Automakers Affected

Canada supplies approximately 10% of cars sold in the US. Bringing this production to the US would require an estimated six new plants, adding billions in costs.

Consumer Consequences

Tariffs could raise average US retail car prices by $3,000. Retaliation from Canada and Mexico would compound the economic consequences, leading to collapsing demand.

Full On-shoring Prohibitive

Full relocation of non-US production to the US would require a 75% boost in US production and $50 billion in investment.

Auto Parts and Components

Tariffs would also affect the flow of auto parts and components, forcing US automakers to source from alternative countries with higher costs.

Aluminum Impact

Aluminum producer Alcoa warns that tariffs on Canadian aluminum could cause higher prices, ultimately impacting auto parts and aerospace.

Economic Outlook

The report underscores the economic pain tariffs would inflict on both sides of the border, including higher production costs, job losses, and increased consumer expenses.