Canada Removes Tariffs for Automakers Committed to Keeping Plants Running

Mark Carney, the Prime Minister of Canada, announced that his administration will permit automakers to import vehicles manufactured in the US without incurring tariffs, provided these companies continue their production activities in Canada.

This decision offers some respite from the ongoing trade tensions for companies such as General Motors Co. and Stellantis NV, which operate assembly plants in Ontario but also export significant volumes of vehicles from the US to Canada.

Last week, Carney introduced retaliatory tariffs of up to 25% on vehicles produced in the US, effectively mirroring an earlier action taken by US President Donald Trump against foreign automobiles. For decades, the automotive supply chain has been tightly interconnected among the US, Canada, and Mexico.

The majority of cars and trucks manufactured in Canada are sent to the US, where US-made vehicles dominate sales among Canadian auto dealers.

“Our counter-tariffs will not apply as long as they keep producing, employing, and investing in Canada,” Carney stated during a press briefing. Nevertheless, if a manufacturer reduces production or investment in Canada, the volume of tariff-free vehicles it can import will decrease, according to a news release from Canada’s Finance Department.

The announcement from the Carney government comes amid rising fears that automakers may relocate production away from Canada due to Trump’s tariffs. Stellantis has temporarily suspended operations at its plant in Windsor, Ontario, where Chrysler and Dodge vehicles are manufactured, while General Motors recently indicated plans to close a Canadian facility for several months due to a lack of demand for the electric vans it produces. Ford Motor Co. has an assembly plant in a suburb of Toronto but is currently not in operation.

In parallel, Japanese media outlet Nikkei reported that Honda Motor Co. is considering transferring some of its auto manufacturing from Canada and Mexico to the US, aiming for 90% of its US vehicle sales to be produced domestically.

Honda presently manufactures CR-V and Civic models at its plant in Alliston, Ontario, and last year unveiled a C$15 billion ($10.8 billion) long-term strategy to develop an electric vehicle supply chain in Canada, supported significantly by taxpayer funds.

Industry Minister Anita Anand is slated to meet with the head of Honda’s Canadian operations on Tuesday, according to an official statement. “We are maintaining close communication with the company, and Honda has clarified that no production shifts affecting Canadian operations have been decided or are being contemplated at this time,” her office relayed via email.

A Honda representative stated via email that the plant “will continue to operate at full capacity for the foreseeable future, with no changes under consideration at this moment.”

As he campaigns for the national election on April 28, Carney mentioned that he and other government officials have engaged in multiple discussions with leaders of global automakers.

“We are fully engaged with the challenges” concerning the auto tariffs, Carney emphasized, referencing a campaign commitment to establish a C$2 billion fund aimed at bolstering the Canadian auto supply chain. Regardless of the election outcome, negotiations with Trump will be necessary to devise a broader strategy addressing the tariff conflict, he indicated.

According to Carney, the Trump administration’s auto tariffs will, in the end, impose higher costs on consumers in both the US and Canada. “It’s ill-advised, it won’t succeed,” he commented, noting signs that Trump may be reconsidering some of these policies.

Carney’s chief competitor in the upcoming election, Conservative Party Leader Pierre Poilievre, has also vowed to engage with Trump on tariffs and has proposed eliminating the federal sales tax on new cars manufactured in Canada.

The government also announced a six-month tariff exemption for imports from the US that are utilized in Canadian manufacturing, processing, and food and beverage packaging, as well as for certain items related to public health and national security goals.

Currently, Canada imposes 25% counter-tariffs on around C$60 billion worth of US products apart from automobiles. These tariffs are impacting a broad array of US steel and aluminum goods, along with items such as tools, computers, and consumer products.

The exemptions introduced on Tuesday will provide relief to Canadian businesses reliant on US components, as well as to institutions like hospitals, long-term care facilities, and fire departments, as stated by the government.

© 2025 Bloomberg

Follow Moneyweb’s comprehensive finance and business news on WhatsApp here.