A tariff tiff between the U.S. and Canada could affect auto industry prices and jobs on both sides of the border. (Photo by Geoff Robins / AFP) (Photo by GEOFF ROBINS/AFP via Getty Images)
The tariff tiff between the U.S. and Canada has devolved into a case of “tariff us, we’ll tariff you more,” and the auto industry in both nations is stuck in the middle of the long-running spat that’s already cost jobs and sales.
After trade talks between the two countries broke down on Monday, Pres. Donald Trump took the tariff gambit up a big notch, declaring he’ll double the levies on Canadian-made vehicles, parts and steel by 50% on January 1, 2027.
Is that a genuine threat, a savvy negotiating ploy or just bluster?
The head of a large midwest dealership group that sells a great number of Canadian-built vehicles through its various brands believes it’s the latter, but he’s not taking what may turn out to be a real threat lightly.
“That’s not going to happen, but it’s definitely going to cause fear, you know, which is unfortunate because it’s going to affect our business and probably not in a great way,” said Ryan Rohrman, CEO of the 20-dealership Rohrman Automotive Group, in an interview. “To me, it seems like it’s an empty threat to get them to get back to the table and to come to some type of an agreement.”
But it could happen and one economist isn’t writing off the possibility with dire results.
“That 50% tariff is such a step up that I think it would really shock the industry, and it could cause supply chain disruptions on both sides of the border,” predicted Tyler Harp, industry economist at the Center for Automotive Research in an interview. “If the 50% tariff came to pass, it would definitely impact vehicle cost, and I think it’s such a high step up that it would lead to increased vehicle prices much faster than perhaps the current round of tariffs have.”
Indeed, in the first twelve months after Pres. Trump first installed his so-called “Liberation Day” import tariffs in April, 2025 a key impact has been a reallocation of market share across North America with increased sales of U.S. produced vehicles “largely at the expense of Canadian imports as opposed to those from overseas. Canada produced vehicle sales in the U.S. were down 35%,” according to a report by Harp released in July.
A month later, Harp says doubling the import tariff on vehicles manufactured in Canada would simply put that nation’s auto industry in even greater distress.
“That 50% tariff, I think, would make those plants, and likely Canadian suppliers, really just uncompetitive compared to other sources. I think it would just really make them uncompetitive within the United States market,” he observed.
It not as if automakers can simply flip a switch and move vehicle production from Canada to the U.S. to avoid the levies since re-tooling is time-consuming and costly and it takes years to build new assembly plants, observed Harp.
While some automakers have absorbed at least a portion of the tariffs, Rohrman says the cost of “everything” has gone up from vehicles to parts and service.
“I think overall we’ve just seen a really big increase in the cost to maintain vehicles, not only in the parts, I mean, the parts side is up because those costs on the tariffs aren’t really being absorbed by the manufacturer, so that’s a straight pass through to the consumer,” he said.
A January arrival of steeper import tariffs would be especially bad timing since that month is typically the slowest for vehicle sales, Rohrman noted.
He understands Trump may simply be using the threat of doubling tariffs on Canadian vehicles and parts as a negotiating tactic that may ultimately succeed.
“But it’s at what’s the cost, of the stress, and just trying to deal with our customers the best way we can because that’s our job, and also to deal with our employees because if cars keep going up and car sales slow down, then you’re potentially putting more business pressure on auto dealers to say, well, how many how much staff do we need to handle the demand,” Rohrman noted.
For Tyler Harp, the trade conflict between North American neighbors is a new thing to him, but he ultimately believes that given how integrated the automotive industry is on the continent the nations will understand they’re stronger together than going it alone, offering, “ideally we end with some sort of U.S.-Canada trade deal or a North American trade deal.”
This article was originally published on Forbes.com