United States Auto Exports to Canada Surge Due to Tariff Slashes

According to the latest data from Statistics Canada, affected by the tariff dispute between the United States and Canada, the total value of passenger cars imported by Canada from Mexico in June reached 1.08 billion Canadian dollars (equivalent to 784 million US dollars), surpassing the 950 million Canadian dollars worth of cars imported from the United States. This is the first time since monthly data records began in the early 1990s that the monthly sales of Mexican-made cars in the Canadian market have exceeded those of American-made cars.

The Trump administration’s imposition of a 25% tariff on imported cars broke the long-standing system of essentially free movement of vehicles and auto parts among Mexico, the United States, and Canada. For light vehicles and pickups that meet the USMCA (United States-Mexico-Canada Agreement) requirements, the tariff only applies to non-U.S.-made components. However, this limited relief has failed to repair the tense relationship between the United States and Canada.

Image Source: Ford Motor Company

As a countermeasure, Canada announced tariffs on U.S.-assembled cars, with a tariff structure broadly similar to the Trump administration's tariff policy. However, the Canadian government also offers tariff reductions to automotive companies that maintain production and continued investment within Canada.

As the largest export destination for American-made light vehicles and pickups, the shift in Canada's automobile import pattern may serve as a barometer for how Trump's tariff policies could reshape the U.S. automotive industry.

According to data from the U.S. Department of Commerce, in 2024, including the auto parts sector, the United States has a trade surplus with Canada in the automotive industry. U.S. vehicle exports to Canada exceed the combined exports to Germany, Mexico, and China.

Automakers such as General Motors and Ford typically supply the Canadian market with vehicles produced in the United States. Ford currently has no production at its only assembly plant in Ontario, but the company has committed to start producing F-Series heavy-duty pickup trucks at the plant next year.

Despite the decline in U.S. automobile exports to Canada, Mexico's automobile exports to Canada soaring to the top position may be unsustainable. Data shows that in February and March of this year, under the threat of potential tariffs, automakers rushed to ship goods before the tariffs took effect. The total value of automobiles imported by Canada from the U.S. surged, with the average monthly import reaching 2.5 billion Canadian dollars, compared to just over 1.8 billion Canadian dollars per month last year. This figure is far higher than the total amount of automobiles Canada imports from Mexico.

Currently, most major automakers have not offset the higher costs brought by tariffs through widespread price increases. Instead, they have shifted part of their production to the United States or adjusted their supply chains to sell "Made in USA" vehicles to American consumers.

Erin Keating, an analyst at Cox Automotive, stated that it is crucial to eliminate the uncertainty surrounding trade agreements as soon as possible. She said that U.S. policymakers should fully recognize that one of the reasons the U.S. can attract automotive manufacturing investment is due to its key position within the larger North American automotive supply chain that includes Mexico and Canada.

However, there is no sign that Trump will give up pushing for more manufacturing to return to the United States, which means the restructuring of the global automotive supply chain will continue for years.

Brian Kingston, CEO of the Canadian Automobile Manufacturers Association, stated: "What we are seeing now is a reluctant acceptance—perhaps this is the new normal, with tariffs remaining in place for the long term." However, he added that he hopes the United States and Canada can reach a better agreement.

Kingston stated, "How should companies respond to tariff policies? Is it possible to reduce tariffs by shifting production? Should the increased costs be passed on to consumers? These are all unresolved issues that companies are striving to address."