The agreement’s language indicates that vehicles brought in under CUSMA will pay tariffs only on the non-U.S. content of their vehicles. President Donald Trump just signed an executive order to slap a 25 percent tariff on auto imports to the U.S. This new legislative provision will go into effect next week. The tariffs aim to encourage companies to produce goods domestically, but manufacturers have expressed concerns about the feasibility of redistributing North America’s integrated automobile industry.
How could a supposed conservative leader like Ontario Premier Doug Ford ever oppose such a good idea! Lutnick knows a little something about the complicated auto trade battleground that is the Canada-U.S. Perhaps unsurprisingly, the provincial government is still not sure when Canadian vehicle production will get a special break from the tariff. Ford has announced it will put off responding to the new tariffs until after April 2, waiting to see how things play out.
“A lot of the automobiles that are manufactured here in Ontario have 50, 60 per cent parts from the U.S.” – Doug Ford
President Trump is doing just that with “reciprocal” tariffs, as one part of a much broader strategy. If these new tariffs go into effect, they’ll increase U.S. duties to the level of tariffs other countries impose on U.S. exports. These tariffs will have a chilling effect on the American supply chain. Canadian-made vehicles that have less than 50 per cent U.S. parts will still be caught up in these new tariffs as well.
Canadian-made vehicles with 50 percent or more American parts will not face these duties. The fact sheet says that CUSMA auto parts will not face any tariffs until a process is formally established to determine when content isn’t from the U.S. Howard Lutnick, Cantor Fitzgerald’s CEO, will take the helm in developing this process in coordination with U.S. Customs and Border Protection.
Industry experts are already warning that the tariffs will increase costs for domestic manufacturers. In the end, consumers would be left with higher prices while costing the industry in competitiveness.
“The result is higher costs for manufacturers, price increases for consumers, and a less competitive industry.” – Brian Kingston
