Trump Threatens 50% Tariffs on Canadian Autos Following Collapsed Trade Negotiations

US President Donald Trump on Monday threatened to raise US tariffs on all cars, lorries and automotive parts from Canada to 50 per cent starting on January 1, intensifying a trade fight after negotiations collapsed last week.

The trade deal would have cut the top-line tariff rate on Canadian cars and light-duty lorries from 25 per cent to 15 per cent, and the tariffs on aluminium and steel from 50 per cent to 25 per cent. However, the agreement fell apart on Friday over multiple points of contention, including whether the US tariff relief would apply to medium or heavy-duty trucks.

This escalation threatens to disrupt one of the world's most integrated car supply chains. US vehicle production relies heavily on Canadian-made parts and vehicles, meaning higher tariffs could increase costs for American car makers and consumers while deepening a trade stand-off that has already impacted auto stocks.

"Build in the US and there are zero tariffs. Canada will be treated like a state no longer," Mr Trump wrote in a social media post. "On trade, and in other ways also, they are among the worst nations in the world to deal with. They feel entitled, and yet, we don't need Canada, they need us."

Despite the aggressive rhetoric, it remains unclear if the new tariffs will actually be enacted. The January 1 introduction leaves room for potential negotiations, although Canadians see little chance of talks resuming before the midterm elections in November.

Canadian Prime Minister Mark Carney is set to respond to the weekend tariffs with levies of his own on September 8, and the US has threatened further escalation if he does. During a media conference in Quebec on Monday, Mr Carney stated that a "mutually beneficial deal" with the US was possible, provided the Americans respect Canada's sovereignty.

"When the Americans go to the negotiating table first with the right attitude toward our industry and a true partnership, of course we'll come to the negotiating table," he remarked at a briefing announcing an investment in six new Canadian icebreaker ships.

Following the announcement, shares in car makers dropped. Ford and Stellantis stocks fell 3.6 per cent and 4.2 per cent respectively, while General Motors shares dropped 1.6 per cent on Monday afternoon. Toyota stock declined 1.5 per cent in New York trading, and Honda shares decreased by 2.1 per cent.

"A threatened US tariff on Canadian auto parts will be paid by [the] US auto assembly. Without those specific parts, auto assembly throughout the US would halt," warned Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association.