Newly reelected United States President Donald Trump has never been shy about his love for tariffs. He is even reported to have stated that “I love tariffs. Tariff is my favourite word. The most beautiful word in the dictionary is tariff. I tell you: I think it’s more beautiful than love.” At this point, it looks certain that tariffs in one form or the other will be imposed on Canada and on Mexico. In this post, we give a response to the question “how will President Trump’s tariffs affect vehicle prices in the U.S. and Canada?”
Overview of Proposed Tariffs
The United States and Canadian auto industries are deeply interconnected, with a significant flow of vehicles and parts crossing the border daily. That makes the threat by President Trump to impose tariffs on imports from Canada and Mexico concerning.
In November 2024, President Trump announced plans to implement a 25% tariff on imports from Canada and Mexico, effective January 20, 2025. These tariffs are intended to address issues related to illegal immigration and drug trafficking. However, they also pose significant implications for the automotive sector, which relies heavily on cross-border trade.
By how much will cars in the US increase if a 25% tariff is imposed on Canadian imports?
The issue of tariffs can be divisive. Like everything else in the United States, the idea has become rather politicised. Are tariffs good or are they bad? Who ends up paying for them at the end of the day? Is it Canadians or people in the US? President Trump clearly believes tariffs are a good way of raising revenue while leveling the playing field in trade with other countries.
Meanwhile, critiques believe tariffs are actually nothing but a tax on consumers. That’s because in most instances, business do not bother absorbing the effect of the additional charges. What they do instead is to pass on the tariffs to consumers, leading to inflation. So, by how much will cars in the US increase if a 25% tariff is imposed on Canadian imports, and assuming that business pass on the burden to consumers? The table below shows what to expect;
| Vehicle Model | Current Price (USD) | Estimated Price Increase (25% Tariff) | New Price After Tariff (USD) |
|---|---|---|---|
| Ford F-150 (Built in Canada) | $45,000 | $11,250 | $56,250 |
| Chevrolet Silverado 1500 | $47,500 | $11,875 | $59,375 |
| Toyota RAV4 (Canada-made versions) | $32,000 | $8,000 | $40,000 |
| Honda CR-V (Built in Canada) | $34,000 | $8,500 | $42,500 |
| Dodge Grand Caravan | $30,000 | $7,500 | $37,500 |
| GMC Sierra 1500 | $50,000 | $12,500 | $62,500 |
| Ford Edge (Manufactured in Ontario) | $39,000 | $9,750 | $48,750 |
| Chrysler Pacifica | $37,000 | $9,250 | $46,250 |
Canada will retaliate
Events in recent days have shown that Canada will not take the tariffs lying down. If President Trump follows through on his proposed 25% tariffs on Canadian imports, Canada is likely to respond with strong countermeasures.
Historically, when the U.S. has imposed trade restrictions, Canada has retaliated with its own tariffs, targeting key American industries. Already we have heard threats to limit oil and gas to the United States.
There are also reports that many Canadians are now cancelling planned holidays in the US. In general, the following can be expected as part of Canada’s response;
1. Counter-Tariffs on U.S. Goods
Canada could impose equivalent tariffs on American exports, focusing on politically significant industries. In past trade disputes, Canada has targeted U.S. steel, aluminum, agriculture, and consumer goods. A new round of counter-tariffs could hit sectors like:
- Automobiles and auto parts (hurting U.S. manufacturers)
- Agricultural products (impacting U.S. farmers, particularly in swing states)
- Consumer goods (raising costs for American retailers)
2. Trade Diversification
Canada may shift its trade relationships, deepening ties with the European Union and Asian markets. By reducing reliance on U.S. imports, Canada could cushion the economic blow while strengthening alternative trade partnerships.
Already, there are reports that Canada is looking for ways through which it can increase its oil to China in the face of hostility from the US. The country’s $34 billion Trans Mountain expansion comes at an opportune time and provides Canada’s with a gateway through which to reach international markets apart from those provided by its now unpredictable neighbor.
3. Legal Action Through the USMCA and WTO
Canada could challenge the tariffs under the U.S.-Mexico-Canada Agreement (USMCA) and at the World Trade Organization (WTO). If found in violation of trade rules, the U.S. could face penalties or be forced to reverse the tariffs.
Launching a challenge at the WTO is a route that China, another country on President Trump’s crosshairs, has chosen to take. So, Canada could choose to do the same, a development that will further increase the trade tensions between it and the US.
4. Slowing Cross-Border Trade and Permits
The Canadian government could introduce stricter regulations, inspections, and delays for U.S. goods at the border, making it more expensive and time-consuming for American businesses to trade with Canada.
By how much will cars in the US increase if a 25% tariff is imposed on Canadian imports?
Now we get back to the question “How will President Trump’s tariffs affect vehicle prices in the U.S. and Canada? In this section, we will take a look at prices in Canada. Remember that we have just been talking about how Canada may choose to retaliate by imposing reciprocal tariffs. Should that be the case, and assuming that manufacturers pass on the burden to consumers, what can you expect.
If Canada chooses to retaliate against President Trump’s tariffs by imposing its own 25% tariff on U.S. vehicle imports, Canadian consumers would likely see significant price increases on American-made cars. Below is a table estimating the expected price increases for various vehicle models:
| Vehicle Model | Current Price (CAD) | Estimated Price Increase (25% Tariff) | New Price After Tariff (CAD) |
|---|---|---|---|
| Ford Mustang | $40,000 | $10,000 | $50,000 |
| Chevrolet Silverado 1500 | $55,000 | $13,750 | $68,750 |
| Dodge Ram 1500 | $60,000 | $15,000 | $75,000 |
| Tesla Model Y | $70,000 | $17,500 | $87,500 |
| Chevrolet Equinox | $36,000 | $9,000 | $45,000 |
| Jeep Wrangler | $50,000 | $12,500 | $62,500 |
| Ford Explorer | $55,000 | $13,750 | $68,750 |
| Chevrolet Tahoe | $75,000 | $18,750 | $93,750 |
What This Means for Businesses and Consumers
Please note that our analysis makes a number of assumptions, not all of which may come to pass. As an example, we assume that if the US imposes a 25% tariff on Canada, Canada will respond by imposing a 25% tariff on the US. That may not actually be the case. Canada may choose to respond with a lower or higher tariff.
Canada may also choose to target different goods or different states. As an example, when news of the tariffs was first announced that President Trump was looking to impose tariffs, government officials in Canada stated that they would respond by targeting Republican (Red) states that export to Canada.
Another basic assumption that we have made is that manufacturers will pass on all tariff expenses to consumers. That may not actually be the case. Some manufacturers may choose to take a hit on their profit margins as a way of cushioning their buyers.
Having said, a U.S.-Canada trade war will likely increase prices for both American and Canadian consumers. Auto manufacturers, farmers, and retailers on both sides of the border will end up feeling the strain, leading to potential job losses and economic slowdowns.
With tensions rising, businesses and policymakers will be closely watching how Canada responds if these tariffs go into effect.
U.S.-Canada Automotive Trade: Key Figures and Trends
The United States and Canada share one of the world’s most intertwined automotive industries. Billions of dollars’ worth of vehicles and auto parts cross the border each year, reflecting the deep economic ties between the two nations. That only goes to show that the impact of the tariffs will be felt in both countries. Below is a table showcasing the latest trade figures in the automotive sector.
U.S.-Canada Automotive Trade Statistics (2023)
The table below highlights that level of trade taking place between the United States and Canada when it comes to the automotive industry. In fact, other than the energy sector, this is the biggest area of trade between the two countries.
| Category | U.S. Imports from Canada (USD) | U.S. Exports to Canada (USD) | Total Trade Volume (USD) |
|---|---|---|---|
| Passenger Vehicles | $31.2 billion | $19.5 billion | $50.7 billion |
| Auto Parts | $15.4 billion | $14.8 billion | $30.2 billion |
| Trucks & Commercial Vehicles | $7.1 billion | $6.3 billion | $13.4 billion |
| Engines & Transmissions | $5.6 billion | $5.1 billion | $10.7 billion |
| Total Automotive Trade | $59.3 billion | $45.7 billion | $105 billion |
Why U.S.-Canada Auto Trade Matters
Clearly a lot of trade happens in the automotive industries between the two countries, answering the question, “How will President Trump’s Tariffs affect vehicle prices in the U.S. and Canada?” Trade between the US and Canada matters, but why is that the case?
- Deep Supply Chain Integration – Many vehicles are built with parts from both countries, crossing the border multiple times during production. This is something that not many people are aware of. Car parts may cross over several times from one country to another before being used on a final product.
- Economic Growth & Jobs – The automotive industry supports millions of jobs in both the U.S. and Canada, including manufacturing, logistics, and retail.
- Tariff Risks – New trade barriers, such as a proposed 25% U.S. tariff on Canadian imports, could disrupt supply chains, increase vehicle prices, and slow economic growth.
Industry Responses
So, how will automakers respond to the tariffs uncertainty? The following is to be expected;
- Investment Delays: Companies like General Motors and Ford are postponing major investment decisions due to tariff uncertainties, which could affect their competitiveness, especially against global rivals.
- Appeals for Government Intervention: According to Reuters, the Japanese Automobile Manufacturers Association has sought assistance from the Japanese government to protect its automakers from potential U.S. tariffs, highlighting the global ramifications of such trade policies.
Expect price increases
At this point in time, it looks that the tariffs on Canada and on Mexico are going ahead. In this article, we answered the question “How will President Trump’s Tariffs affect vehicle prices in the U.S. and Canada?” Our answer was two dimensional. We first looked at the expected price increases in the U.S. We then look at the expected increase in Canada.
It became clear that the proposed tariffs on automotive imports between the U.S. and Canada will likely have profound effects on vehicle prices, manufacturing operations, and the broader economies of both nations. As one of the foremost auto shipping companies in North America, US Canada Auto Transport will not be spared the impact of these tariffs. As such, we hope a middle ground will be found at the end of the day.