In a recent speech to Congress, President Donald Trump is reported to have stated that ““Tariffs are about making America rich again and making America great again.” The US President is also reported to have stated that the word “tariff” is “the most beautiful word in the dictionary.” To be fair, not a single day passes in President Donald Trump’s presidency that is not newsworthy.
Take a few days ago, when it was reported that the newly reelected US President had decided to defer some threatened tariffs on imports from Canada. The good news is that the auto industry was one of the sectors that got a one month reprieve in this regard. The bad news is that the reprieve is likely to be temporary.
This temporariness was highlighted on 11 March 2025, when it was reported that, on the back of retaliatory measures by Canada targeting electricity exports to the United States, an angry President Trump was now doubling tariffs on the Canadian steel industry to 50%. The President was also reported to have threatened to destroy the Canadian auto industry in retaliation.
President Trump’s Tariffs History
If there is one thing that President Trump needs to be lauded for, it’s for his consistency. His return to the presidency has reignited discussions about his combative trade policies, particularly the use of tariffs. The “America First” agenda, which prioritizes domestic industries, has consistently involved the threat and implementation of tariffs as a tool for reshaping global trading dynamics.
A Recap of the First Term
President Trump’s tariffs crusade is nothing new. The following are some of the measures that were put in place in this regard during his first term;
- Steel and Aluminum Tariffs (2018):
- Early in his first term, Trump imposed tariffs on steel and aluminum imports, citing national security. This action led to retaliatory tariffs from key allies, creating trade tensions.
- The U.S.-China Trade War:
- A defining feature of his presidency was the trade conflict with China. This involved escalating tariffs on billions of dollars’ worth of goods, disrupting supply chains and impacting businesses and consumers worldwide.
- Other Tariff Threats:
- Trump also threatened tariffs against Mexico regarding immigration, the European Union over trade imbalances, and Japan over automotive imports.
The Trump second term and the promise of more tariffs
With his reelection, President Trump has signaled a renewed commitment to his trade agenda, with indications of even more aggressive tariff policies. Key developments include:
- Increased Tariffs on China
- Reports show that the administration is considering further increases in tariffs on Chinese goods, targeting strategic sectors like technology and critical minerals. Already a 10% tariff has been placed on Chinese goods, a development that has seen the Asian giant retaliating with measures of it’s own.
- Tougher Stance on North American Trade
- There are indications that the Trump administration plans to renegotiate aspects of the U.S.-Mexico-Canada Agreement (USMCA), with potential tariff threats to pressure Canada and Mexico on trade imbalances. As we speak, some tariffs targeting the two countries are already in place. More a threatened, including those covering the automotive industry.
- Broadening Tariff Targets
- The administration has also expressed interest in expanding tariffs to other countries, with the goal of reducing the U.S. trade deficit and promoting domestic manufacturing. One target is the European Union. Following the imposition of a 25% tariff on steel and aluminium, the EU responded by introducing it’s own tariffs targeting Republican States.
Uncertain Times Lie Ahead for the Auto Industry
The automotive industry, a cornerstone of both the United States and Canadian economies, finds itself navigating a period of significant uncertainty. The culprit? The spectre of potential tariffs. As noted already, President Trump recently deferred tariffs on some goods, including those in the auto industry.
He initially gave Canada and Mexico a month to curb the flow of fentanyl into the U.S, failure of which the two countries would be punished with 25% tariffs. That month lapsed on 04 March 2025. With the markets roiling, President Trump decided to postpone some of the tariffs for another month.
Though many in the automotive sector welcomed this, the lingering possibility of increased tariffs has sent ripples of concern through manufacturers, dealers, and consumers alike, creating an atmosphere of economic unpredictability. Tariffs have been having a negative effect, but how so?
Supply Chain Disruptions
The automotive sector relies on a highly integrated North American supply chain. Vehicle parts sometimes cross the border a number of times before a vehicle is finalized. Tariffs would introduce significant cost increases, potentially leading to a restructuring of these intricate supply lines.
Price increases for most vehicles
Manufacturers, faced with higher costs, will likely pass them on to consumers. This translates to increased prices for new vehicles, potentially dampening sales and impacting consumer confidence. That could have dire consequences on the economy as whole. In any case, the table below highlights the price increases that consumers can expect should 25% tariffs be instituted;
| Vehicle Type | Base Price (Hypothetical) | 25% Tariff | Estimated Price Increase | Potential New Price |
|---|---|---|---|---|
| Compact Car | $20,000 | $5,000 | $5,000 | $25,000 |
| Mid-Size Sedan | $30,000 | $7,500 | $7,500 | $37,500 |
| Full-Size SUV | $50,000 | $12,500 | $12,500 | $62,500 |
| Pickup Truck | $40,000 | $10,000 | $10,000 | $50,000 |
| Luxury Sedan | $80,000 | $20,000 | $20,000 | $100,000 |
Here is a full article showing how tariffs are likely to affect vehicle prices. In the post we take a look at some of the most popular vehicle brands sold in Canada and in the United States.
Job Security Concerns
Both the U.S. and Canada host significant automotive manufacturing operations. Tariff-induced changes could lead to production shifts, potentially impacting job security in both nations. This issue has become very topical, particularly in the United States.
That’s because, in response to the threat of tariffs, some Canadian Premiers are now threatening to target the so called “red states,” in the U.S with counter tariffs. It’s clear that the issue is becoming highly politicised. An unstable business environment will likely see a large number of jobs being lost in the affected areas.
Decreased investment
In a climate of uncertainty, companies become hesitant to make major investments. This could stifle innovation and long-term growth within the auto industry. It’s a major concern for both the United States and Canada.
Navigating the Unpredictability
President Trump has deferred tariffs on the auto industry, but what can consumers do to survive in these trying times. To begin with, there is no certainty that the deferment will last longer than the stated one month period.
In response to the introduction of a surcharge on electricity exported to the US, president Trump threatened to take measures to essentially shut down the Canadian auto industry. That was in spite of the fact that the industry had initially been given a month long reprieve.
All that goes to show the level of uncertainty that now exists with the industry. How will both manufacturers and consumers navigate these unpredictable times?
The current situation requires adaptability and proactive strategies from stakeholders.
- Manufacturers:
- Companies are exploring alternative sourcing options and contingency plans to mitigate potential tariff impacts. They are also advocating for continued dialogue to reach mutually beneficial trade agreements. However, these measures may not be practical in the short term. It takes a long time for an auto manufacturing plant to be set up and launched anywhere in the world. Another challenge is that though the auto industry has been spared for the moment, steel and aluminium are still getting tariffed at 25%. These are components that make up a large part of the average car, meaning price increases are highly likely to come.
- Dealers:
- Dealerships are preparing for potential price fluctuations and working to provide customers with accurate information. They are also focusing on building strong customer relationships to navigate any market uncertainties. Again, there is a huge challenge that is presented by the current uncertainty. Remember that this is the second time that President Trump has deferred his tariffs. Does that mean he will do so for a third time come the end of the month? It’s a big problem for dealers in terms of pricing. Should they factor in the 25% tariff now or should they wait till the tariffs have actually kicked in?
- Consumers:
- Consumers are advised to stay informed about potential developments and carefully consider their vehicle purchasing decisions. Recent reports indicate that a number of consumers across the United States have decided to protect themselves by rushing to buy new vehicles before the tariffs kick in. According to a reports, February 16 to February 22 saw searches on car-shopping website Cars.com increasing by about 9 percent when compared to the week before.
- Industry Advocacy:
- Industry associations are actively engaging with policymakers to emphasize the potential negative consequences of tariffs and to advocate for a stable and predictable trading environment. However, it remains to be seen whether or not this advocacy will yield results.
Looking Ahead
For now, President Donald Trump has deferred tariffs on the auto industry. However, questions remain on whether or not this reprieve will last. As the new April 2 deadline approaches, the auto industry remains jittery, preparing for various scenarios that could unfold.
While the recent deferrals have provided short-term relief, the prospect of future tariffs continues to loom over the industry. Automakers are likely to continue their efforts to adapt to the evolving trade landscape, seeking strategies that ensure resilience and competitiveness in an unpredictable environment.