As Canada braces for a new wave of auto tariffs, uncertainty looms over car buyers, manufacturers, and dealerships. With over three-quarters of vehicles sold in Canada being imported, even modest tariff rates could reshape the market landscape. This results in price increases, delayed consumer choices, and wearing away dealership margins as the industry faces supply chain disruptions, making long-term affordability a risk. These are 20 questions Canadians are asking about the auto tariffs:
What Are Auto Tariffs and Why Are They Being Imposed?
Auto tariffs are tariffs on imported cars intended to protect local automakers and provide bargaining power in trade talks. Canada, which imports 76% of its car supply, is weighing tariffs amidst rising global protectionism and retaliation from trading partners. Placing a 15% tariff on foreign vehicles could bring billions in domestic revenue at the expense of consumers. Policymakers defend tariffs as necessary reprisals, particularly against foreign subsidies or imbalances in trade. However, they also risk provoking trade retaliation and inflation, making it harder for Canadian car buyers internationally and in terms of affordability.
How Will Auto Tariffs Impact Car Prices in Canada?
Auto tariffs will significantly increase car prices in Canada. With a 15% tariff on a car that costs $45,000, the purchaser would be charged an extra $6,750. Because the majority of cars available in Canada are imported, the entire market will be affected. As of 2024, the price of a new vehicle averaged $66,000. A tariff of 20% would make that almost $79,200. These raises might cut annual consumer demand by 10–15%, particularly since financing is increasing. Middle-income families, who are already tight in their wallets due to inflation, would be most hurt. Tariffs directly reduce affordability and potentially lower sales volume overall.
What Cars Will Be Hurt the Worst by the Tariffs?
Imported cars, especially from the U.S., Japan, and Germany, will suffer most from tariffs. Over 800,000 units of Toyota, Honda, and BMW were sold combined in Canada during 2024, virtually all of them imported. A 20% tariff on a $55,000 BMW increases its price to $66,000, deterring purchase. Luxury and overseas brands will experience a sales drop of 20–30%, while locally made cars have a competitive advantage. But this won’t balance out the overall sticker shock, because there aren’t many Canadian-manufactured models. Technological and electric imports are also threatened, increasing costs for forward-thinking buyers. The blow will fall mainly on cars that are imported entirely abroad.
Will Used Vehicles Also Be Affected by Tariffs?
Yes, used cars will experience second-hand but heavy price increases. Consumers will turn to the used market as new-car prices increase due to tariffs. This ripple effect already exists as prices for used cars increased 12% in 2024, averaging $39,000. Tariffs may drive that to $44,000 or more. Import tariffs on used vehicles, particularly imported from the U.S., would cut the available supply. Customers looking for low-cost alternatives would have to pay more for higher-mileage, older cars. The used car market may get overheated, with low supply and high prices in almost all segments.
Are Canadian-Made Cars Exempt from the Tariffs?
Canadian-made cars will be exempt from the tariffs, but their share is too small to protect consumers. Only 13% of cars sold in Canada in 2024 were made domestically, restricting their ability to stabilize prices. In addition, most Canadian-made cars are based on foreign parts, some 60% of them, which can still be subject to tariffs. It increases production costs even when the final assembly is domestic. Even as brands such as Chrysler and Ford stand to gain in the short run, supply is limited, so demand quickly gets ahead of production. Hence, the exemption cannot safeguard Canadians from general market inflation.
How Much More Would I Pay for a New Car?
With a tariff of 15%, the Canadian average new car price of $66,000 would increase by $9,900. Models in the $90,000 range will cost more than $13,500. This increase does not include higher interest charges on larger car loans. At a 7% interest rate on a 5-year loan, the $9,900 tariff cost translates into $2,100 in added interest alone. Overall costs of ownership might increase by $12,000 or more per vehicle. For price-sensitive consumers, this might divert demand to lower-end trims or postpone purchases. The affordability crisis would worsen, particularly for families already pinched by inflation and flat wage growth.
Will Auto Tariffs Impact Car Insurance Premiums?
Indirectly, auto tariffs will likely drive up insurance premiums. As the cost of replacing vehicles increases, so do the payouts insurers have to absorb for total losses. A 15% tariff-inflated rise on a $60,000 vehicle adds $9,000 to its insured value. That alone would increase comprehensive premiums by 6–8%. Repair prices will also rise since foreign components are subject to tariffs, up to 20% on high-demand parts. This drives collision claims up. In Ontario, where the average premium is $1,700, even a 7% hike adds almost $120 annually. These little hops accumulate nationally, pushing the average insurance premiums in all provinces upward within one or two years.
Can I Still Import a Car from the United States?
Yes, but it is going to be a lot more expensive. Approximately 20% of the cars Canadians import yearly are from the United States. Because of threatened tariffs, a $50,000 U.S.-bought car would incur a $10,000 duty under a 20% tariff, in addition to transport, inspection, and compliance fees of another $2,000 to $3,000. This eliminates any past savings benefit, and regulatory tightening could make self-importing bureaucratically more difficult. Border slowdowns and bureaucratic barriers will increase, particularly if customs classifications are reorganized. For buyers who previously depended on U.S. imports for affordability or trim level options, tariffs will make those choices much less feasible or cost-effective.
How Will Tariffs Impact Canadian Auto Employment?
Auto tariffs will make winners and losers in the job market. Canada’s automotive production industry has over 125,000 workers, but most are in sales, distribution, or service for foreign-made vehicles. If new automobile sales decline by 12%, a conservative prediction, dealerships would eliminate thousands of positions. Independent importers and cross-border brokers would have reduced demand. Domestic automakers such as Stellantis and GM Canada would create jobs in assembly or logistics as demand shifts at home. Analysts estimate a net loss of 10,000 to 15,000 jobs in 18 months if tariffs continue. Service and parts businesses may also see decreases from dwindling inventory turnover.
Are Luxury Cars More Susceptible to Tariffs?
Luxury cars are among the most tariff-susceptible. Almost 95% of luxury models sold in Canada, like BMW, Mercedes-Benz, and Audi, are imported. A 20% tariff on a $100,000 vehicle tacks on $20,000 in cost. This drives many models into higher tax brackets, raising luxury tax loads. Luxury brands accounted for 12% of Canadian auto sales in 2024. Analysts predict a 30% drop in this segment after the tariff. Dealerships are already reducing inventory. Consumers might shift to high-end trims of mass-market brands instead. The segment’s decline will also affect service departments, as fewer high-end vehicles mean lower high-margin maintenance revenue.
Will Tariffs impact Electric Vehicles?
Electric vehicles (EVs) are highly susceptible to tariffs. In 2024, more than 80% of EVs sold in Canada were imported, mainly from the U.S., South Korea, and Germany. A tariff on a $60,000 EV of 20% equals $12,000, which could override federal and provincial rebates. Supply chains for EVs are international, with necessary parts, such as lithium-ion batteries, imported from Asia. If tariffs apply to parts, the cost of production rises even more. Analysts predict EV sales will drop 25% in Canada, particularly for mid-priced models. The reversal may bring back national climate goals, such as the requirement that 60% of new car sales will be zero-emission by 2030.
How Do Auto Tariffs Impact Car Leasing?
Auto tariffs make leasing cars less desirable because higher monthly payments inflate costs. With a 15% tariff on a $50,000 vehicle, the capitalized cost jumps to $57,500, boosting lease payments accordingly. In 2024, median monthly lease payments were $740; with tariffs, they could top $850. Leasing is based on assumed depreciation, greater vehicle prices translate into greater depreciation levels, which get passed on to the lessee. Companies can cut lease incentives to maintain profit margins, adding to the problem. Leasing once served as an affordability tool for many Canadians, especially in urban markets, but tariffs risk turning it into a less viable option.
Will Tariffs Impact Auto Parts and Repairs?
Yes, auto parts, mainly imported ones, will face sharp cost increases under tariffs. Canada imports over $21 billion in auto parts annually, many supporting new and used vehicle repairs. Applying a 20% tariff on crucial elements such as sensors, transmissions, or body panels would increase the repair cost by 15–20%. A bumper costing $1,200 in 2024 would cost between $1,400 and upwards. Insurers would raise thresholds on claims or declare total losses, impacting the success of claims. Independent workshops that depend on after-market imports may transfer the excess costs to motorists or close their doors, constraining rural and suburban areas’ repair services.
Can Dealerships Weather a Tariff Shock?
Canadian dealerships are under significant financial pressure from tariffs. With more than 3,200 franchised dealerships across the country, most depend on high-volume imported vehicle sales. A 10–15% reduction in vehicle demand and increasing floorplan financing expenses threaten profit margins. Most dealerships have less than 2% net margins, with little leeway for disruption. Smaller or rural distributors with limited inventories might be compelled to consolidate or close down. Service departments would remain profitable in the short term, but declining vehicle throughput would affect long-term profitability. Experts caution that as many as 300 dealerships will be closed within two years if tariff-related sales continue to decrease without counteracting stimulus.
What is the’ Role Played by the Auto Tariffs in Trade Agreements?
Trade agreements like USMCA (previously NAFTA) are designed to prevent arbitrary tariffs but have loopholes for enforcement. Long-standing disputes over origin rules and subsidy forms re-litigated in 2024 reignited trade tensions, most notably in autos. USMCA requires 75% North American content to allow tariff-free vehicle movement, but complexity in the supply chain makes it costly to meet. If Canada determines individual American or Mexican cars to be non-compliant, retaliatory tariffs can be applied. The reverse may occur with Canadian exports. These legal structures affect the game but cannot always shield consumers from the consequences. Tariffs thus tend to escape the original purpose of free trade and create loopholes and tensions.
Are Tariffs Permanent or Temporary?
Tariffs on autos are usually meant to be short-lived, but last for many years. History shows that tariffs that arrive during wars remain effective for 5 to 7 years on average. If Canada starts a 15% tariff in 2025, it can remain effective through 2030 or longer, depending on political cycles and negotiations. Tariffs must be taken away by diplomatic agreement and economic logic, both of which are scarce in a time of increasing protectionism. As supply chains rescale, industries can rearrange themselves around the tariffs so that elimination would be disorienting. Canadians must be ready for long-term impacts even when policies are marketed as transitional.
How Do Tariffs Impact Car Rental Prices?
Car rental companies rely on foreign models due to their acquisition and resale value savings. Tariffs increase acquisition costs, which then get passed through to consumers through higher rental fees by rental operators. A tariff of 20% on a $35,000 fleet vehicle adds $7,000 a unit to diminish profitability. 2024 tariffs drive average per-day rental fees in major metropolitan areas from current levels of $65 to $75 to $80. Corporate, travel, and tourism will suffer the pinch, especially during peak-season travel. There are smaller rental shops that will delay new-fleet replacements and older existing cars from being rented. These ripple consequences become more expensive and less accessible to Canadians and travelers.
Will Consumers Delay Car Purchases?
Yes, consumer hesitancy is already rising in anticipation of tariff-induced price hikes. In 2024, Statistics Canada recorded a 6.4% year-over-year drop in new car inquiries as uncertainty grew. Inflationary and perceived value-sensitive items like cars are costly. If tariffs increase the cost of new vehicles by $7,000 or more, most consumers will wait for market stabilization. This postponement impacts dealerships, manufacturers, and lenders. Secondary impacts include increased maintenance expenses as older vehicles remain on the road longer. Consumer confidence in the automotive industry will fall by 10–12% in 2025 if there isn’t a clear tariff direction soon.
Are There Any Winners From Auto Tariffs?
If imports are less competitive, Canadian automakers like GM, Ford, and Stellantis have a market share opportunity. Localized sourcing incentives could also benefit domestic auto parts suppliers. Canadian production grew by 4.2% in 2024, and tariffs would lift that to 7–8% annually at the very least in the short run. Increases are dampened, however, by industry contraction overall. Domestic car models can register a 10% gain in sales, but not nearly enough to fully balance lost import volume. Higher operating costs can also eat into profits, making such gains precarious and dependent on deft supply chain realignment.
How Can the Government Counteract the Effect?
The federal government has a few levers that can counteract tariff backlash. Rebates or tax credits will ease consumer pain, especially for EVs and home purchases. Federal EV rebates in 2024 reduce buying prices by up to $5,000, which could be expanded to every Canadian-made vehicle. Infrastructure investments, such as local battery plants, could reduce long-term costs. Low-cost financing or short-term exemption from sales taxes may encourage continued demand. Without them, the sector would experience 10–15% yearly sales declines.
22 Times Canadian Ingenuity Left the U.S. in the Dust
When people think of innovation, they often picture Silicon Valley. However, Canada has a history of innovation, too. Whether it’s redefining sports, revolutionizing medicine, or just showing America up at its own game, Canadian inventors, thinkers, and dreamers have had their fair share of mic-drop moments. Here are 22 times Canadian ingenuity left the U.S. in the dust.
22 Times Canadian Ingenuity Left the U.S. in the Dust
