Trump threatens to double Canadian car tariffs

On Monday, US President Donald Trump announced plans to double US tariffs on automotive products imported from Canada, potentially reaching 50 percent starting January 1. This move comes after negotiations broke down the previous week, with the proposed deal aiming to reduce the tariff rate on Canadian cars and light-duty lorries from 25 percent to 15 percent, and on aluminum and steel from 50 percent to 25 percent.

The conflict arose over the question of whether US tariff relief would apply to medium or heavy-duty trucks. The escalation poses a threat to the highly integrated car supply chain, as US vehicle production heavily relies on Canadian-made parts and vehicles. Higher tariffs could increase costs for American car manufacturers and consumers, deepening the trade dispute that has already negatively impacted auto stocks.

Trump tweeted, "Build in the US and there are zero tariffs. Canada will be treated like a state no longer," emphasizing the US's view of Canada as a dependent nation. However, it remains unclear if the new tariffs will be implemented. Canadian Prime Minister Mark Carney responded with retaliatory tariffs on September 8 and threatened further escalation if negotiations do not occur before the midterm elections in November.

Carney expressed the possibility of a mutually beneficial deal with the US, but stressed the importance of respecting Canada's sovereignty. Shares in car makers experienced a decline, with Ford and Stellantis stocks decreasing by 3.6 percent and 4.2 percent, respectively, while General Motors saw a 1.6 percent drop. Toyota and Honda also experienced a decline in their respective stocks.