Auto exports from the U.S. to its northern neighbor have plunged in the wake of the Trump tariff war, Canada now importing more vehicles from Mexico for the first time in three decades.
Trump’s tariffs are adding about $2,000 to the price of the typical auto in the U.S. according to a study by AlixPartners.
Canada has become one of the primary targets in Donald Trump’s trade war and that’s turning into bad news for the U.S. auto industry.
For the first time in three decades, Canada imported more vehicles from Mexico than the United States in June as a growing number of Canadian consumers boycott U.S.-made products and the country levies its own stiff counter-tariffs.
The slowdown in exports to one of the largest U.S. trade partners comes at a time when industry analysts are warning of a slump in the domestic automotive market after several years of post-COVID growth. The downturn is expected to accelerate in the months ahead as tariffs on imports autos and auto parts, as well as foreign-made steel and aluminum fully take effect.
Oh, Canada
Canadians are importing more vehicles from Mexico than the U.S., including this Chevrolet Equinox.
In June, Canada imported C$1.08 billion, or US$784.5 million, worth of passenger vehicles from Mexico, and only C$950 million, or US$689.9 million, from the United States, according to Statistics Canada.
The last time Mexico topped the U.S. in terms of auto exports to Canada was in the early 1990s, reported the Bloomberg news service.
What happens going forward is uncertain, industry analysts caution. Canadian auto imports have fluctuated significantly since Pres. Donald Trump was sworn in for a second term in January and then quickly launched a global trade war. The country’s auto importers quickly ordered a flood of American-made products in a bid to beat the tariffs which went into effect in May. The country’s dealers are now selling off a backlog of those vehicles.
Disrupting a long-time partnership
A number of popular models, such as this Chevrolet Silverado, are made in Mexico.
Trump’s trade war with Canada has been especially problematic for the auto industry as it disrupts what had become a closely interwoven 3-nation manufacturing network that functioned almost as if there were no borders. That was enshrined in the original North American Free Trade Agreement and then the subsequent U.S.-Mexico-Canada Agreement, or USMCA, signed during Trump’s first term.
Currently, Canadian goods face 25% tariffs – though the specific terms are complicated when it comes to the auto industry. For vehicles produced either North or South of the border, duties applies only to the value of non-U.S. content.
Further complicating matters, Canada has retaliated against the U.S. with essentially identical tariffs. The country has also announced tariff relief efforts meant to keep automotive production in the country.
More Tariff News
- Expect to Spend $2,000 More for Your New Vehicle as Tariffs Take Hold
- Automakers Hold Back on Tariff Price Hikes – For Now
- Auto Sales Up in July But Show Signs of Slowing as Tariffs Take a Bite
Long-term damage
A Buy Canadian poster.
Another factor working against the U.S. is the significant growth in Mexican automotive manufacturing over the past two decades. Mexico is now seventh among automaking nations, according to Mexico News Daily, behind China, the United States, Japan, India, South Korea and Germany in terms of total output.
Mexico’s auto plants in some cases provide the same products traditionally sourced from the States, such as the Chevrolet Silverado pickup. But they also tend to focus on the smaller, less expensive products that Canadians tend to prefer, such as the Chevrolet Equinox, Hyundai Accent and Volkswagen Taos.
As in the U.S., automakers have tried to minimize the impact of the Trump trade war on Canadian consumers by so far minimizing price hikes. But Cox Automotive and other analysts anticipate buyers will begin facing more tariff-driven inflation with the arrival of the 2026 model-year, at least on American-made vehicles.
Adding to the problem, the auto industry faces growing pushback from the “Buy Canada” movement – which also could be described as a “Don’t Buy U.S.” boycott. Fully 71% of Canadians said they plan to buy fewer goods shipped from the States this year, according to a report from retail data consulting firm dunnhumby.
Last month, Nissan said it was indefinitely idling production of three American-made product lines popular in Canada, the Pathfinder and Murano SUVs and Frontier pickup trucks, because of the Trump trade war.
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