Carney hits back at U.S. with Canadian tariffs on autos

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Prime Minister Mark Carney imposed targeted tariffs on U.S.-made automobiles but stopped short of broader retaliatory levies in response to Donald Trump’s trade war against Canada and other trading partners.

The U.S. President’s global auto tariffs, which cover more than US$460-billion worth of imports and auto parts annually, had immediate repercussions in Canada and the United States. Auto maker Stellantis NV temporarily halted production at assembly plants in Windsor, Ont., and Mexico, laying off 3,200 people in Canada and 2,600 in Mexico, in addition to 900 layoffs at six U.S. factories.

But countertariffs carry some risks for Canada. They could push up costs for domestic businesses and consumers while potentially inciting the U.S. to further escalate the trade war.

Mr. Carney told a news conference Thursday that Ottawa had no choice but to impose 25-per-cent tariffs on the non-Canadian components of American-made cars that are compliant with the United States-Mexico-Canada (USMCA) trade agreement. The move mirrored Mr. Trump’s auto tariffs on Canada and Mexico.

The tariffs would also affect American cars that are not compliant with USMCA, which is also referred to as CUSMA, but not auto parts or Mexican-made cars.

“We take these measures reluctantly and we take them in ways that it’s intended and will cause maximum impact in the United States and minimum impact here in Canada,” he said.

Canada has already imposed tariffs on a wide range of U.S. goods valued at $60-billion.

The Liberal Leader paused his campaign Wednesday to plan countermeasures in consultation with cabinet colleagues and hold talks with provincial and territorial leaders on Thursday.

“The government will be responding by matching the U.S. approach with 25-per-cent tariffs on all vehicles imported from the United States that are not compliant with CUSMA, our North American free-trade agreement,” he said. “Our tariffs though, unlike the U.S. tariffs, will not affect auto parts because we know the benefits of our integrated production system.”

The government will also develop a framework for auto producers in Canada to get federal relief from U.S. tariffs as long as they maintain production and investment in this country.

Stellantis pauses Windsor and Mexico auto production, lays off U.S. workers

Ontario Premier says he supports Carney’s response to U.S. tariffs

Mr. Carney said the money raised by the Canadian countertariffs will be returned to affected workers and companies. That would be on top of a $2-billion fund he promised last week to help rebuild the domestic auto industry.

“Importantly, every single dollar raised from those countertariffs, which could reach around $8-billion before remission, will go directly to our auto workers and the companies affected by those tariffs,” he said.

Mr. Trump imposed sweeping global tariffs on his country’s trading partners but spared Canada and Mexico for imported goods that are compliant with USMCA. But Canada still faces 25-per-cent tariffs on steel, aluminum and autos.

Canadian-made autos would be hit with 12.5-per-cent levies, rather than the full 25 per cent, as long as they contain 50 per cent U.S. content as required under the existing USMCA trade deal. Companies that are not USMCA compliant would also face tariffs of 25 per cent, with 10 per cent on potash and energy, but those could be lifted if Mr. Trump decides Canada has done enough to stop the flow of illegal fentanyl into the U.S.

“They are all unjustified, unwarranted and in our judgment, misguided,” Mr. Carney said.

The Windsor Stellantis plant, which makes minivans and Dodge Chargers, will close for two weeks on April 7. The plant in Toluca, Mexico, which manufactures the Jeep Compass, will shut for at least the month of April.

The temporary U.S. layoffs are at factories in Michigan and Indiana that supply the two assembly plants. The Stellantis shutdowns will also hit companies in Ontario that supply the assembly plants, said Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, which represents 230 Canadian suppliers. Mr. Volpe predicted layoffs will soon happen at those suppliers.

Mr. Volpe also said Elon Musk’s Tesla will be among the vehicles to face Canadian tariffs, given their high U.S. and Chinese content.

Ontario Premier Ford, who chairs the Council of the Federation of premiers and territorial leaders, said Ottawa’s countertariffs were fair and measured. He spoke to the CEO of Stellantis Canada and expressed optimism that the Windsor plant would be reopened.

“It’s a temporary shutdown. I mentioned my concerns to the CEO of Stellantis and how we need to have this plant up and going,” Mr. Ford said.

Conservative Leader Pierre Poilievre announced his own auto measures at a campaign event in Kingston, vowing to remove the sales tax from Canadian-made autos that could save $2,500 on a $50,000 vehicle. The savings could be $7,000 if the provinces match Ottawa’s sales tax cut.

“We will increase demand for Canadian-made cars and keep more workers on the job,” he said.

Mr. Trump says the tariffs will spur manufacturers to build in the U.S., creating jobs. However, experts say the tariffs are inflationary and will reduce car sales and production. About 44 per cent of the cars sold in the U.S. are imported.

Canadian auto unions, unlike the United Auto Workers in the U.S., came out strongly against the tariffs.

“Unifor warned that U.S. tariffs would hurt auto workers almost immediately and in this case the layoffs were announced before the auto tariff even came into effect,” said Lana Payne, the Unifor national president.

“Trump is about to learn how interconnected the North American production system is the hard way, with auto workers paying the price for that lesson.”

At his news conference, Mr. Carney warned that Canada can expect more U.S. tariffs on lumber, pharmaceuticals and semiconductors.

“This would be a mistake and we will make a calibrated and energetic response to any new tariffs,” Mr. Carney said, adding he wants to open USMCA negotiations with the Trump administration after the April 28 election.

Mr. Carney, who is a former governor of the Bank of Canada and Bank of England, said Mr. Trump’s trade war will jolt the global economy but also boost U.S. inflation and could dip that country into a recession. That would likely pull Canada’s economy into a recession as well.

Mr. Carney predicted the road ahead will be bumpy because Mr. Trump won’t retreat until Americans feel the economic pain.

“Although their policies will hurt American families, until that pain becomes impossible to ignore, I do not believe they will change direction,” Mr. Carney said.

NDP Leader Jagmeet Singh also proposed new policies to counter the U.S. trade action, calling for five- to 10-year Victory Bonds that could be deducted from Canadians’ paycheques. “This is an opportunity for Canadians to invest in our country,” he said at a campaign event in Ottawa.

Bloc Québécois Leader Yves-François Blanchet said Mr. Trump’s announcement sets the stage for future negotiations and allows the rest of the campaign to continue in a “normal” way.

“It could have been worse,” he said, speaking in Quebec City before Mr. Carney’s announcement. “But the best part of this all is that we still have 25 days during which we will be able to have a normal campaign, or a more normal campaign, because the negotiations will start only after [the election.]”

With reports from Bill Curry, Steven Chase and Emily Haws