Latest U.S. auto tariffs a recipe for higher prices, layoffs across North America

An employee works on the production line at the Martinrea auto parts manufacturing plant in Woodbridge, Ont., on Monday Feb. 3, 2025. The site supplies auto parts to both Canadian and U.S. auto plants. THE CANADIAN PRESS/Chris Young

The auto industry is sounding the alarm about U.S. President Donald Trump’s latest tariff announcement, which could weigh on companies, raise consumer prices and result in job losses.

Trump announced Wednesday he would impose 25 per cent tariffs on auto imports to the U.S., set to take effect next week. He also said the Detroit Three automakers have to move their parts divisions back to the U.S.

It’s still not certain what that means for the Canadian auto sector. Ontario Premier Doug Ford said on Thursday that he’d been told by U.S. Secretary of Commerce Howard Lutnick that Canada would face a different rate but it was unclear when Canadian vehicles would see the tariff break.

Trump’s 25-per-cent plan risks essentially shutting down the industry and costing many Americans their jobs, said Flavio Volpe, president of the Automotive Parts Manufacturing Association.

“If (Trump) insists on tariffs on Canada and Mexico, his reward will be risking the employment of a million American autoworkers. He either doesn’t understand how intertwined we are or doesn’t care,” he said in an interview on Wednesday.

A closely knit industry

The North American auto industry is highly integrated, with parts coming from numerous countries, explained Art Wheaton, director of labour studies at Cornell’s School of Industrial and Labor Relations.

“A typical vehicle could have its parts go back and forth across the U.S.-Canadian or U.S.-Mexican border multiple times before it’s finally assembled,” he said.

The Canadian Chamber of Commerce said this means tariffs could add potentially thousands of dollars to the final cost of a vehicle.

The White House said automobiles imported under the Canada-U.S.-Mexico Agreement will only face tariffs on the value of content not made in the United States.

The tariffs apply not only to whole vehicles, but also to certain parts like engines and transmissions. Parts subject to the trade agreement won’t face the new tariffs until the U.S. figures out how to apply tariffs to their non-U.S. content, the White House said Wednesday.

Volpe warned that tariffs could lead to shutdowns on both sides of the border.

“Donald Trump doesn’t care about the wake he leaves in U.S. industry, and I think Canadians and other allies should disavow themselves of the idea that we can plead a case for our industries,” he said.

As for Trump’s insistence that the automakers move production to the U.S., that would cost tens of billions of dollars, TD economist Andrew Foran said in a January report on tariffs’ potential effects on the auto sector.

It would take longer than Trump’s four-year presidency to make such a huge and expensive change, Wheaton said: “I don’t know how realistic it is.”

Prices to rise for consumers

Not only will the price of a new car rise as a result of tariffs, replacement parts and insurance will also become more expensive, Wheaton said.

“Short term, long term, medium term, every term, it’s just going to raise costs,” said Wheaton.

“You’re going to see a steady rising of prices very quickly in the U.S., and I would assume Canada and Mexico as well.”

Consumers will likely turn to used cars to save money, and in fact are already doing so, said Baris Akyurek, vice-president of insights and intelligence at Autotrader.ca.

This uptick in demand will make used cars more expensive too, he said.

The human impact

Industry and union leaders warn the tariffs will result in layoffs in both the U.S. and Canada.

“It’s the biggest fight. It’s the fight of our lives,” said national president Lana Payne at a press conference Thursday.

“The supply chain is such that these tariffs will cause a collapsing of that supply chain, which means the industry itself will be in trouble,” said Payne.

Trump’s tariffs not just on auto products but also many other goods are expected to hurt the Canadian economy. This, too, will hurt workers, Payne said, as an economic downturn would weigh on consumer demand for cars and therefore dampen production at the plants.

“Once those shutdowns start happening, if you have anything disrupting the trade, you’ll see huge layoffs and downsizing in the sector, because people don’t want to build product unless they know they can sell,” said Wheaton.

William Muir, who works at GM supplier Lear Corp., said the Canadian government needs to stand behind workers.

“This affects them as well. This affects their economy, this affects their people, this affects their voters,” he said, speaking in Oshawa on Thursday at the Unifor Local 222 office.

“They need to stand behind us and fight for our jobs and fight for our rights and fight for our wages, and make sure that nothing leaves Canada.”

Jason Gale, who has worked at GM in Oshawa for 23 years, said as a union representative he hears how anxious and uneasy workers are.

“Of course, we are always worried ... they are all anxious. They are uneasy,” Gale said.

“These decisions affect them daily. They need to come to work, they need to collect a paycheque.”

---

Rosa Saba and Sharif Hassan, The Canadian Press

This report by The Canadian Press was first published March 27, 2025.

---

U.S. President Donald Trump’s reciprocal tariffs on trading partners are set to take effect on April 2, a day he has proclaimed as “Liberation Day” for American trade. CTV News will have extensive coverage across all platforms:

• CTVNews.ca will have in-depth coverage, real-time updates, and expert analysis on what the tariffs will mean for Canadians.
• CP24.com will report on any developments out of Queen’s Park and what the tariffs means for the people of the GTHA.
• BNNBloomberg.ca will explain what this means for the business community, investors, and the market.