The auto trade between the United States and Canada is caught in an escalating dispute. Since talks between Washington and Ottawa collapsed on Aug. 21, the U.S. has imposed 50% duties and then outright import bans on selected Canadian products, Canada has retaliated, and President Donald Trump has said tariffs on Canadian cars, trucks and auto parts will rise to 50% on Jan. 1, 2027.

How the dispute escalated

  • July 20: Trump signs three proclamations under Section 338 of the Tariff Act of 1930 imposing 50% additional duties on certain Canadian goods, citing Canada's treatment of U.S. dairy, alcoholic beverages and motor vehicles.
  • Aug. 18: The duties are suspended for three days after, according to the White House, Canada expressed a commitment to remove the measures at issue.
  • Aug. 21–22: Talks break down, and the duties take effect at 12:01 a.m. Eastern on Aug. 22.
  • Aug. 24: Trump posts on Truth Social that on Jan. 1, 2027, tariffs on "all Cars, Trucks, both large and small, Automotive Parts, and Steel" from Canada will rise to 50%.
  • Sept. 8: Canada imposes retaliatory tariffs on about $20 billion of U.S. goods, including steel, dairy and agricultural equipment. Trump signs five more proclamations banning certain Canadian dairy, alcohol and motor-vehicle products and changing the list of goods subject to the duties.
  • Sept. 15 and 29: The revised duty list takes effect, followed by the import bans.

What Washington objects to

The motor-vehicle proclamation targets Canada's own auto tariffs. Since April 2025, Canada has charged a 25% tariff on U.S.-built vehicles that do not qualify for USMCA treatment and on the non-originating content of those that do, alongside automaker-specific quotas. The proclamation says Canada cut those quotas for companies that shifted production out of the country and that U.S. motor-vehicle exports to Canada fell about 22%, from roughly $25.9 billion to $20.3 billion, according to a summary by customs broker GHY International.

The Section 338 duties apply even to goods that qualify under the U.S.-Mexico-Canada Agreement and come on top of Section 232 tariffs, the White House said. Non-U.S. vehicles and parts already face a 25% Section 232 tariff, CBS News noted.

The industry's exposure

Canada's assembly and powertrain plants are tightly linked to U.S. production. GM's Oshawa Assembly in Ontario has built more than 500,000 Chevrolet Silverado pickups since late 2021. On Aug. 30, days after talks collapsed, GM Canada ratified new three-year agreements with Unifor covering about 4,600 workers and announced about C$1.4 billion of planned investment at Oshawa and its St. Catharines propulsion plant over three years. Oshawa will add next-generation GMC Sierra Heavy Duty production alongside the Chevrolet Silverado HD, and St. Catharines will become the sole source of a next-generation transmission. At CAMI Assembly, GM extended layoff benefits while it assesses opportunities for the site.

Suppliers warn that parts tariffs would hit U.S. factories first. "Without those specific parts, auto assembly throughout the US would halt," Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association, said in AP and Reuters reporting published by Al Jazeera. Trade attorney Barry Appleton told CBS News that the tariff is collected from American importers, so "the first invoice usually lands in a Michigan showroom, not in Ottawa."

Canada's market is already shifting

Canadian buyers are moving away from U.S.-built vehicles. J.D. Power Canada data reported by Automotive News and GM Authority show U.S.-assembled vehicles accounted for 28.4% of Canadian new-vehicle sales in the first half of 2026, down from 35.4% a year earlier, while Mexico's share rose to 22.2% from 18.3%. Automakers with Canadian plants, including GM, Ford, Honda, Stellantis and Toyota, kept more flexibility through Canada's tariff-remission program; for automakers without Canadian production, the U.S.-built share of their Canadian sales fell to 4.9% from 17.7%. Brian Kingston, CEO of the Canadian Vehicle Manufacturers' Association, called the tariffs "a self-defeating policy."

What comes next

The Jan. 1 increase was announced on social media, and the proclamations reviewed for this article do not spell out how a 50% rate would apply to USMCA-qualifying vehicles and parts. Talks on the broader USMCA relationship continue: Mexico has proposed that the U.S. tariff only components made outside North America and lower the headline rate on North American vehicles, The Wall Street Journal reported in August.

For automakers, the outcome will decide whether trucks built in Oshawa, engines from St. Catharines and the parts that cross the border before final assembly face today's 25% duties, a 50% rate, or a negotiated reprieve. For U.S. car buyers, experts told CBS News that businesses paying the tariffs are likely to pass costs on through higher prices.