Canadian automakers split on strategy as Ottawa resumes U.S. tariff talks

OTTAWA · Canada's auto industry is split over how Ottawa should approach renewed talks with Washington to secure relief from punishing U.S. tariffs. The Detroit Three automakers, Ford, General Motors and Stellantis, are urging the government to accept a deal quickly to stop financial losses. Their Japanese rivals, Honda and Toyota, want Ottawa to avoid agreeing to a tariff level that would leave them uncompetitive and instead favour a system of tradeable import credits. This division presents a challenge for Canadian negotiators as they work to define the country's position in discussions that stalled last summer but have recently picked up again. The industry typically exports nearly 90 percent of its vehicle production to the United States.

Recent developments illustrate both the sector's resilience and its precarious state. Ford has reopened its assembly plant in Oakville, Ont., and Honda announced it is restarting engine production in Canada. In a more troubling sign, Stellantis sold its idled plant in Brampton, Ont., to an armoured-vehicle maker, a move seen as a warning about the industry's future without a deal. The 25 percent U.S. tariff on Canadian-made vehicles, with an exemption for American parts, has severely pressured the sector. The value of Canadian passenger car and light truck exports to the U.S. fell by nearly 12 percent from 2024 to 2025 and is on track for a further decline this year.

Negotiations collapsed in August after Washington offered to lower the headline tariff to 15 percent in exchange for Canadian concessions. That proposal maintained the exemption for U.S. parts but excluded medium- and heavy-duty trucks from relief. While many industry players supported Prime Minister Mark Carney's decision to reject that offer, the lack of a deal has created an unsustainable situation. Informal talks have continued, with U.S. Commerce Secretary Howard Lutnick now leading the American side, according to three sources familiar with the discussions.

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Current negotiations are focused heavily on technical details, particularly the definition of what counts as U.S. content in a vehicle. A broader definition that includes costs like research and development would lower the effective tariff rate paid on Canadian exports. "You want to get a [headline tariff] number as low as you can, and then work the process," said Steve Carlisle, former president of GM North America. He noted that officials from both countries have experience haggling over such definitions under the United States-Mexico-Canada Agreement.

The Detroit Three are advocating for swift action. "We need relief, and we need relief quickly," said Brian Kingston, president of the Canadian Vehicle Manufacturers' Association, which represents Ford, GM and Stellantis. He called the idea of waiting for a future U.S. administration that supports free trade "extremely naive." Ford and GM's Canadian operations may be somewhat more insulated from the tariffs because they produce higher-margin trucks and tend to use more U.S. parts in their vehicles, which lowers the effective tariff they pay.

One industry source with knowledge of GM's calculations said the company's Canadian-made cars often contain more than 50 percent U.S. content, resulting in an effective tariff rate several points below the 12.5 percent average. The issue of tariffs on medium- and heavy-duty trucks, a major point of contention for Carney, may also be less critical than it appears. The same source said about 80 percent of the Chevrolet Silverado trucks built at GM's Oshawa, Ont., plant are classified as light-duty and would have qualified for relief under the August proposal. Honda and Toyota also want a deal but believe the August terms were not viable for the long term. Brendan Sweeney, president of the Pacific Manufacturing Association of Canada which represents the two automakers, said short-term help is useful but locking into an unfavourable arrangement is not. The Japanese automakers support a system that would grant credits to companies that manufacture more vehicles in Canada than they sell here, rewarding domestic production.

With files from The Globe and Mail