WASHINGTON, Aug 24 — President Donald Trump has threatened to raise United States tariffs on all cars, trucks, and automotive parts from Canada to 50 per cent starting January 1, 2027, escalating a trade fight after negotiations collapsed last week.
The trade deal on the table would have cut the top-line tariff rate on Canadian cars and light-duty trucks from 25 per cent to 15 per cent and the tariffs on aluminium and steel from 50 per cent to 25 per cent, but the deal fell apart on Friday over a number of points of contention, including whether the US tariff relief would have applied to medium- or heavy-duty trucks.
The escalation threatens to disrupt one of the world's most integrated auto supply chains. US auto production is heavily reliant on Canadian-made parts and vehicles, and higher tariffs could raise costs for American automakers and consumers while deepening a trade standoff that has already weighed on auto stocks.
"Build in the US and there are ZERO TARIFFS. Canada will be treated like a State no longer! 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!" he wrote in a social media post.
On Monday, US Treasury Secretary Scott Bessent told the media that Trump wants Canada to come to the table and negotiate in good faith.
Meanwhile, Canadian Prime Minister Mark Carney said a "mutually beneficial deal" with the US was possible, but only if 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 will come to the negotiating table," he said during a media conference on Monday to announce an investment in six new Canadian icebreaker ships.
Auto stocks decline on Trump warning
Auto stocks fell on the news. Shares of Ford and Stellantis were down 3.6 per cent and 4.2 per cent, respectively, while shares of General Motors were down 1.6 per cent on Monday afternoon. Toyota stock fell 1.5 per cent in New York trading, and Honda shares fell 2.1 per cent.
Canada has consistently been one of the top two US trading partners, and last year, US goods and services trade with Canada totalled US$872.3 billion (RM3.53) trillion, down 4.6 per cent.
The US Trade Representative's Office said that Ottawa exported about three-quarters of its goods to the US and imported almost half of its goods from the US.
Canada's Automotive Parts Manufacturers' Association president Flavio Volpe said: "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."
The White House did not immediately respond to a request for comment seeking more details on the threatened tariffs.
Canada announces retaliatory tariffs
Canada will impose tariffs on some US goods starting September 8 in retaliation for 50 per cent levies ordered by Trump on US$20 billion (RM80.94 billion) in Canadian products.
"You are at war when you get attacked. We got attacked," Carney said on Saturday when asked whether Canada was engaged in a trade war.
According to an opinion poll by the Angus Reid Institute on Sunday, three in four Canadians approved of the Prime Minister's decision to walk away from trade negotiations with the US late on Friday night.
The White House stated that many automakers have announced or are considering plans to scale back Canadian auto production, and the trade standoff has led to a 22 per cent reduction in Canadian imports of US vehicles.
Major automakers did not immediately comment on Trump's announcement.
Industry skepticism over tariff
Auto executives, speaking to Reuters on condition of anonymity, raised scepticism about Trump's threat, noting that he has previously announced tariffs that were later scaled back or delayed.
They underscored that January was months after the upcoming US midterm elections in November, and that Trump's threat could aim to restart talks.
In January of this year, the President said the US would decertify Bombardier Global Express business jets and threatened 50 per cent import tariffs on all aircraft made in Canada until the country's regulator certified a number of planes produced by US rival Gulfstream.
Neither occurred, but the following month Canada certified several Gulfstream planes.
