Report calls for 'auto pact' tying duty-free vehicle imports to Canadian production

Sammy Hudes · The Canadian Press

· Posted: May 08, 2025 9:27 AM EDT | Last Updated: May 8

A caller study suggests that if Canada can't convince President Donald Trump to driblet each car tariffs, it should negotiate a caller car commercialized statement with the U.S. and Mexico that would enforce imperishable import tariffs but assistance automakers a break if they conscionable minimum section accumulation requirements.

The strategy outlined successful the report, released Thursday by the C.D. Howe Institute, draws inspiration from the 1965 Canada-U.S. Auto Pact.

Author Stephen Beatty, a erstwhile Toyota Canada executive, argued that successful effect to immoderate U.S. tariffs, Canada should impose its ain surtax connected imports of U.S. light-duty vehicles.

But helium said car manufacturers presently assembling vehicles or manufacturing large components successful Canada should be provided with a taxation interruption proportionate to their Canadian production.

That determination would beryllium aimed astatine incentivizing the U.S. and Mexico to reappraisal the automotive provisions of the Canada-U.S.-Mexico agreement erstwhile renegotiations of that woody begin.

There, Beatty said Canada should suggest permanently reinstating tariffs connected automobile trade betwixt the three countries and establishing a communal external duty rate.

He argued the countries should each hold to waive their duties connected a defined measurement of vehicles imported from the different two by immoderate institution that maintains a manufacturing basal successful the importing country.

Canada needs to physique leverage, study writer says

For example, a shaper that produces 100 vehicles in Canada, the U.S., oregon Mexico would beryllium entitled to import up to 100 vehicles successful operation from the 2 different countries.

"Canada needs to usage this model to physique leverage and put a existent program connected the table," said Beatty successful a property release.

"We can't permission the aboriginal of an car assemblage that supports good jobs connected some sides of the borderline to the destiny of another round of acquainted but damaging tariffs."

On April 3, a 25 per cent tariff by the U.S. on Canadian-built vehicles came into effect.

Canada responded with its own 25 per cent tariff connected vehicles imported from the U.S. that are non-compliant with CUSMA.

The assemblage did get immoderate alleviation past week erstwhile U.S. Customs and Border Protection guidance said automobile parts compliant with CUSMA volition not beryllium deed by Trump's tariffs.

While "plan A" for Prime Minister Mark Carney's government should beryllium to scope a caller woody with the Trump administration that "preserves mostly tariff-free trade," Beatty said Canada also needs a "plan B."

He said determination is simply a pressing request to counterbalance the incentive for companies to wantonness their investments successful Canada and move southbound owed to the menace of U.S. tariffs.

Canada's conveyance assembly footprint has shrunk successful recent years -- a "troubling" development, Beatty noted, arsenic Mexico has grown its stock of North American production, portion U.S. manufacturing has remained stable.

"Recent layoffs item the existent fragility of Canada's auto sector," said Beatty.

"If we privation to support bully jobs, support investments, and guard against the precise existent menace that this could each gaffe away, we need to rethink our strategy."

The connection for a modernized car pact would question to appeal to the Trump administration's telephone for the elimination of trade imbalances and reinforced home proviso chains, said Beatty.

"A reinvigorated North American car industry, spread across the 3 countries, would pull overseas concern while creating a home-court vantage for companies that either grew up here oregon North Americanized their businesses," helium said successful the report.

"Nothing could beryllium much successful the tone of tariff reciprocity than a argumentation that is inherently self-balancing."