Fitch: Trump’s Canadian Auto Tariffs May Affect About $45 Billion in Imports

According to Zhitong Finance APP, rating agency Fitch estimated on Monday that US President Trump's latest move to increase tariffs on automobiles and auto parts imported from Canada could affect approximately $45 billion worth of goods.

After several weeks of trade negotiations between the US and Canada broke down last Friday, Trump announced on Monday that starting January 1, 2027, import tariffs on Canadian-made automobiles, trucks, and auto parts would be raised to 50%. This move means the current maximum tariff rate of 25% on Canadian automobile imports will be doubled, marking a significant escalation in US-Canada trade tensions.

Previously, Canada had been trying to reach a new trade agreement with the US to reduce US-imposed tariffs on Canadian products such as automobiles. The negotiations at one point came very close to a conclusion but ultimately broke down late last Friday. According to GlobalData, about 861,000 vehicles produced in Canada in 2025 are expected to be sold to the US. The Canadian auto industry is highly integrated with the North American supply chain, so further tariff increases by the US could bring greater cost pressures to auto manufacturers with production bases in Canada.

It is worth noting that Canada’s auto manufacturing sector is no longer dominated mainly by the traditional Detroit auto giants. In recent years, Toyota and Honda have significantly expanded their automobile production in Canada. According to data from industry organizations representing non-Detroit carmakers, Toyota and Honda together will account for 76.5% of Canada’s automobile production in 2025. The number of vehicles produced by each of Toyota and Honda in Canada exceeds the combined output of Ford (F.US), General Motors (GM.US), and Stellantis NV (STLA.US) in the country. This means if the US ultimately imposes a 50% tariff across the board on Canadian automobile imports, it will impact not only the North American supply chains of the traditional US automobile manufacturers, but also significantly affect Japanese automakers like Toyota and Honda, who have large production bases in Canada.

Olu Sonola, Head of US Economics at Fitch Ratings, stated: “Assuming the same framework as the current Section 232 tariffs and similar levels of imports, we estimate the additional tariff burden could reach $4.6 to $5 billion. Imposing a 50% tariff on automobiles will raise the effective US tariff rate on Canadian goods from the current 5.3% to 6.5%, more than double the 3.1% rate before Section 338 tariffs were implemented. This would represent a dramatic escalation of tariff pressure faced by Canada.”

Olu Sonola noted that Trump’s announcement that the new tariffs will take effect on January 1, 2027, provides some room for negotiations between the parties, “but uncertainty alone will put pressure on the highly integrated North American auto supply chain.” Retaliatory measures by either side could also further worsen losses for both countries.

However, he believes, “Canada is likely to bear most of the consequences of this impact, manifesting as weakened production, investment, and employment.” He said, “If implemented, these tariffs could force a major and economically disruptive restructuring of Canada’s auto industry, with lasting effects on its manufacturing base and broader economy.”

Fitch noted that vehicles and auto parts supplied from Canada account for about 13% of US total automobile and auto parts imports, second only to Mexico’s 37%. The largest category of US imports from Canada is oil and natural gas, accounting for about 30% of total US imports from its northern neighbor, followed by vehicles and auto parts at 12%.

In addition, before new tariffs on Canadian goods are implemented, the Yale University Budget Lab estimates that as of August 11, 2026, the average statutory tariff rate imposed by the US on goods from countries around the world will be 11.0%. Several already scheduled tariff hikes are expected to push this rate up to 11.8% by the end of this year.