Fitch: Trump's tariffs on Canadian automobiles could impact approximately $45 billion in imports.

Fitch Ratings estimated on Monday that U.S. President Trumps latest initiative to raise the tariff rates on imported cars and auto parts from Canada could affect approximately $45 billion worth of goods. After trade negotiations between the U.S. and Canada broke down last Friday, Trump announced on Monday that he would raise the import tariffs on cars, trucks, and auto parts produced in Canada to 50%, starting January 1, 2027. This move means that the current maximum tariff rate of 25% on imported Canadian automotive goods will double, resulting in a further escalation of trade tensions between the U.S. and Canada. Previously, Canada had been trying to reach a new trade agreement with the U.S. to lower the tariffs imposed on Canadian automotive products. The negotiations were once very close to completion but ultimately collapsed last Friday evening. According to GlobalData, approximately 861,000 cars produced in Canada were sold to the U.S. in 2025. Canadas automotive industry is highly integrated with the North American supply chain, and increased U.S. tariffs could create greater cost pressures for automakers with production bases in Canada. It is worth noting that Canadas automotive industry is no longer primarily dominated by traditional automakers from Detroit. In recent years, Toyota and Honda have significantly increased their automotive production in Canada. Data from industry organizations representing non-Detroit automakers show that by 2025, Toyota and Honda will account for 76.5% of Canadas automotive production. The number of cars produced by Toyota and Honda in Canada exceeds the combined output of Ford (F.US), General Motors Company (GM.US), and Stellantis NV (STLA.US) in Canada. This means that if the U.S. ultimately imposes a 50% import tariff on Canadian cars, not only will the North American supply chain of traditional U.S. automakers be affected, but major Japanese automakers like Toyota and Honda, which have substantial production bases in Canada, could also face significant impacts. Olu Sonola, head of U.S. economics at Fitch Ratings, stated, Assuming the same framework as the current Section 232 tariffs and that import levels remain similar, we estimate that the new tariff burden could reach $4.6 billion to $5 billion. A 50% tariff on cars would raise the effective tariff rate on Canadian goods from the current about 5.3% to 6.5%, which is more than double the pre-Section 338 tariff rate of 3.1%. This would signify a dramatic escalation in the tariff pressure faced by Canada. Sonola added that Trumps announcement of new tariffs starting on January 1, 2027, leaves some time for negotiations between both parties, but the uncertainty itself will put pressure on the highly integrated North American automotive supply chain. If both sides take retaliatory measures, it could further exacerbate the losses for both the U.S. and Canada. However, he believes that Canada is likely to bear most of the brunt of this impact, reflected in weakening production, investment, and employment. He remarked, If implemented, these tariffs could force a significant and economically damaging restructuring of the Canadian automotive industry, with lasting effects on its manufacturing base and the broader economy. Fitch noted that Canadian-supplied vehicles and parts account for roughly 13% of total U.S. imports of automotive goods, second only to Mexicos 37%. The most imported goods from Canada are oil and gas, which account for about 30% of total imports from this northern neighbor; the second largest category is vehicles and parts, making up 12%. Furthermore, before the implementation of the new tariffs on Canadian goods, the Yale Budget Lab estimated that as of August 11, 2026, the average statutory tariff rate for U.S. imports from around the world would be 11.0%, with several scheduled tariff adjustments anticipated to drive this rate up to 11.8% by the end of this year.