A decade ago, nearly half of the new cars on Canadian roads were built in America, but after months of restrictive U.S. tariffs, the number of Big Three cars purchased by America’s northern neighbor has fallen dramatically.
According to JD Power Canada, only 28.4% of new vehicle sales in Canada came from U.S. construction products in the first half of 2026, compared to 35.4% in the first half of 2025. From approximately 2021 to 2025, the U.S. market share of new vehicles in Canada was approximately 40%.
Auto analysts blame a for the sharp decline Series of import taxes A tariff has been imposed on Canada over the past year and a half that included a 25% tariff on Canadian-made cars, a levy expected to double and be imposed on Canadian auto parts, steel and vehicles on January 1, 2027. Canada Countermeasures imposedincluding retaliatory tariffs on cars from American manufacturers as well as on steel and aluminum.
The US auto industry relies heavily on Canada, which is the largest export market for American auto markets – larger than the next 10 markets combined, according to a Royal Bank of Canada (RBC) analysis published last month. Auto trade between the two countries has surpassed $100 billion this year, and despite accelerating trade policy, Canada remains America’s largest auto market.
But recent trade policies not only undermine that relationship, analysts warn, but also increase the likelihood that import tariffs intended to punish Canada will actually have a larger negative impact on American automakers.
“The data is irrefutable,” said Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, which represents the largest American automakers in Canada. told automobile News Canada. “By virtually every metric — be it jobs, production, prices, tariff costs — every metric points to the same thing: U.S. trade policy is hurting the U.S. auto industry.”
How tariffs have shaken the US auto industry
The reason for the automotive industry’s customs problems is the fact that no vehicle is built in just one country, but requires thousands of components that are combined in different facilities around the world. This means that US car companies still rely on products from other countries for American cars.
While companies like GM And Stellantis reported billion dollars These increased costs affect consumers through losses from tariffs. Kelley Blue Book estimated the tariffs would increase car prices by up to $6,000which subsequently increases vehicle taxes, financing and insurance costs.
When President Donald Trump introduced the first auto tariffs in April 2025, economists also feared the trade restrictions would result actually lead to fewer vehicles produced in the USA, as so many “American made” cars are actually assembled in Canada or Mexico before being finished in the USA. If fewer cars are produced, the demand for labor would fall, a consequence that may already be coming into play: There are approximately 75,000 fewer manufacturing jobs in the USA since January 2025, including 25,900 fewer in motor vehicle and parts production. Of course, there are also plans for relocation, such as those announced by Toyota $3.6 billion San Antonio assembly plant and Ford’s plans to do so Relocation of some production of Lincoln models The shift from China to the US in 2030 could restore some manufacturing roles in the long term.
To make matters worse for U.S. automakers, their shrinking market share in Canada benefits competitors in Asia and Europe, where cars are cheaper to build because of more integrated supply chains — and tariffs are actually lower, Kingston said Assets. For example, Canada’s imports from Japan rose from 13.7% in the first six months of 2025 to 16.6% in the same period this year, according to JD Power data. South Korean imports rose by one percentage point to 15.6% over the same period, while European imports plateaued.
“We’re in this strange situation where, because of rising tariff costs, it’s now more cost-effective to build a car in Japan or Germany or South Korea or Mexico and bring it to North America than it is to build it here in North America,” Kingston said. “This does not bode well for the future of the North American automotive industry.”
The Future of US-Canadian Trade
Continued strain on U.S.-Canadian relations could have lasting consequences in the years to come. The USA and Canada have had close trade relations in the automotive industry for decades and have signed an agreement Pact In 1965, some import tariffs were abolished and cross-border consolidation of the industry was promised. These relationships were strengthened in 1994 North American Free Trade Agreement (NAFTA)and even more so with 2020 United States-Mexico-Canada Agreement (USMCA).).
However, Trump refused to renew the USMCA, even though he signed the law when it was created six years ago. The agreement mitigated some tariff impacts Providing carve-outs for auto parts, and its loss would lead to additional uncertainty in the supply chain. The Tax Foundation appreciated Eliminating USMCA exemptions would increase taxes by $466 billion over the next decade, about $300 per U.S. household next year, and reduce U.S. manufacturing by about 0.1%, equivalent to a loss of 95,000 full-time jobs.
The loss of U.S.-Canada trade diplomacy will have more than just a short-term economic impact, Kingston argued. It could jeopardize a 60-year-old friendship that has fostered industrial synergies.
“You shrink your market when you take protectionist measures and you make your industry less competitive,” Kingston said. “This is not a recipe for success, and the longer these tariffs are in place, the more damage will be done.”