DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Canada’s appetite for cars built in America has fallen sharply after months of restrictive U.S. tariffs, raising concerns that a policy intended to protect domestic industry is instead imposing painful costs on American automakers. A decade ago, nearly half of new cars reaching Canadian roads were built in America.

Only 28.4% of new vehicle sales in Canada during the first half of 2026 were built in the U.S., according to JD Power Canada data. That was down from 35.4% in the first half of 2025.

From about 2021 through 2025, the U.S. share of Canada’s new vehicle market stood at roughly 40%. The latest figures mark a steep deterioration in a market that has long been crucial to American manufacturers.

Auto analysts attribute the decline to import taxes imposed on Canada during the past year and a half. Those measures included a 25% tariff on cars made in Canada, a levy expected to double and cover Canadian auto parts, steel, and vehicles on Jan. 1, 2027.

Canada responded with countermeasures, including retaliatory tariffs on autos made in America, along with steel and aluminum. That response has intensified the pressure on a deeply integrated cross border industry.

Canada is the largest export market for American automakers, exceeding the next 10 markets combined, according to a Royal Bank of Canada analysis published last month. Auto trade between the countries has exceeded $100 billion this year, and Canada remains America’s largest automotive market.

Analysts warn that recent trade policies are eroding that relationship and may be inflicting greater harm on American automakers than on Canada. The industry’s structure makes simple protectionist calculations difficult because vehicles depend on thousands of components moving through facilities in multiple countries.

“The data is irrefutable,” Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, told Automotive News Canada. “By virtually every metric—be it jobs, production, prices, tariff costs—every metric points to the same thing: U.S. trade policy is damaging the U.S. auto industry.”

American auto companies remain dependent on foreign products even when producing cars identified as American. The movement of parts and unfinished vehicles across borders means tariffs can repeatedly raise costs throughout the manufacturing process.

GM and Stellantis reported billions of dollars in tariff losses, while consumers face higher prices. Kelley Blue Book estimated that tariffs would increase vehicle prices by as much as $6,000, with additional effects on auto taxes, financing, and insurance costs.

When President Donald Trump introduced the first auto tariffs in April 2025, economists feared the restrictions could reduce U.S. vehicle production. Many cars identified as American are assembled in Canada or Mexico before being finished in the U.S.

There are about 75,000 fewer manufacturing jobs in the U.S. than in January 2025, including 25,900 fewer jobs in motor vehicle and parts production. The source noted that reshoring plans could restore some manufacturing positions over the longer term.

Those plans include Toyota’s announced $3.6 billion expansion of its San Antonio assembly plant. Ford also plans to move some production of Lincoln models from China to the U.S. in 2030.

Meanwhile, the shrinking American share of Canada’s market has created openings for Asian and European competitors. Kingston said their more integrated supply chains and lower tariffs make vehicle production cheaper.

Canadian imports from Japan rose from 13.7% in the first six months of 2025 to 16.6% during the same period in 2026, according to JD Power data. South Korean imports climbed one percentage point to 15.6%, while European imports remained level.

“We’re in this odd situation where it is now more cost-effective to build a car in Japan or Germany, South Korea, Mexico, and bring it into North America than to build here in North America because of all of the mounting tariff costs,” Kingston said. “That does not bode well for the future of North America’s automotive industry.”

The U.S. and Canada have maintained close automotive trade ties for decades, beginning with a 1965 pact that removed some import taxes and sought to consolidate the industry across their border. Those ties were later strengthened through NAFTA and the USMCA.

Trump has declined to renew the USMCA despite signing the legislation when the agreement was created six years ago. The agreement had limited some tariff effects through carve outs for auto parts, while its lapse could add further uncertainty for supply chains.

The Tax Foundation estimated that removing USMCA exemptions would increase taxes by $466 billion over the next decade. That would amount to about $300 per U.S. household next year and reduce U.S. output by roughly 0.1%, equivalent to working hours from 95,000 full time jobs.

“You shrink your market when you take protectionist policies, and you make your industries less competitive,” Kingston said. “This isn’t a winning formula for success, and the longer these tariffs are being in place, the more damage it’s done.”

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.