Freedom: Tariffs against Canada could hit the U.S. auto industry

U.S. President Donald Trump has threatened to raise tariffs to 50% on cars, trucks, auto components, and steel produced in Canada starting January 1, 2027. For automobiles, if the threat is carried out, the rate would double from the current 25%.  The market has already reacted to the statement with declines in shares of U.S. automakers. Ford (F) fell 3.4%, Stellantis (STLA) — 3.5%, General Motors (GM) — 1.1%. Transportation companies also came under pressure: J.B. Hunt Transport dropped 5.7%, Knight-Swift — 3.5%, Old Dominion Freight Line — 2.4%.  

According to Freedom analyst Vladimir Chernov, the new round of the trade conflict could hit the automotive industries of both countries the hardest. However, Trump’s threat should not yet be taken as a final decision: the tariff parameters and the list of goods may still change during negotiations.

Tariffs could raise costs for Ford, GM, and Stellantis

The main problem for automakers is the close integration of U.S. and Canadian supply chains. A vehicle can be assembled in Canada from U.S.-made components, while individual parts may cross the border several times during the production process.

General Motors produces Chevrolet Silverado pickups in Canada. Ford has invested about $3 bn in a facility in Ontario, where it plans to produce the F-Series Super Duty. Stellantis also has significant capacity in the country.  

Therefore, a 50% tariff could lead to higher costs even for U.S. companies. According to Chernov, the additional expenses would have to be either absorbed through lower manufacturers’ profits or passed on to buyers through higher prices.

The U.S.–Canada trade conflict will affect carriers and steelmakers

Another vulnerable sector could be freight transportation. The drop in J.B. Hunt, Knight-Swift, and Old Dominion already reflects investors’ concerns about a potential reduction in trade flows between the two countries.  

Higher tariffs on Canadian steel could increase costs for U.S. automakers and construction companies. At the same time, some U.S. steelmakers could benefit from reduced competition: after Trump’s statement, shares of Steel Dynamics were up 6.8% intraday, Nucor — 5.5%, Cleveland-Cliffs — 9.4%. By the close, however, the sector’s leading names gave up most of the gains.  

Auto parts retailers may benefit from higher car prices

A potential beneficiary of the new tariffs could be the auto repair market. If new cars become more expensive, consumers may keep older vehicles longer, increasing spending on maintenance and parts. This could support the business of the largest U.S. retailers . Thus, after Trump’s statement, AutoZone shares rose 1.7%, O’Reilly Automotive — 1.8%, and Advance Auto Parts — 2.5%.  

At the same time, for U.S. consumers the overall effect, in Chernov’s view, is more likely to be negative. Beyond automobiles, higher prices for Canadian steel and other materials could raise the cost of home construction.

The U.S. also risks suffering from the new tariffs

Despite the fact that the new tariffs are aimed at Canadian goods, it will also be difficult for the U.S. economy to avoid negative consequences. The close integration of the two countries’ supply chains means that higher trade barriers may increase costs for companies in the U.S. and lead to higher prices for consumers.

According to Chernov, North American supply chains have been formed over decades as a single system, so it is impossible to split them quickly. As a result, part of the additional costs could ultimately fall on U.S. consumers.

For Canada, however, the consequences of a potential trade war would be more significant: the U.S. accounts for about 62% of its foreign trade turnover.

For now, it is specifically a threat to impose tariffs. Chernov notes that Trump’s tough statements are often used as a pressure tool in trade negotiations, so until January 1 the tariff level and the list of affected goods may still change.

U.S.–Canada trade talks have influenced auto tariffs before

Tariff policy toward Canada has repeatedly changed during negotiations. On August 19, Freedom ⁠wrote that Trump postponed the introduction of 50% tariffs on Canadian goods by three days after a preliminary agreement was reached. Canada then expressed readiness to remove measures that the U.S. considered discriminatory toward American cars and a number of other goods.  

Previously, U.S. authorities have also adjusted tariff policy toward the automotive sector. Freedom ⁠reported on a partial easing of auto tariffs in April 2025: manufacturers were granted exemptions from part of the additional fees and compensation for some tariffs already paid. The measures affected, among others, General Motors, Ford, and Stellantis.  

For U.S. automakers, tariff risks remain relevant now as well. In July, Freedom ⁠wrote about General Motors’ results: despite strong reporting, analysts noted pressure on the company’s margin in the coming quarters.  

Not an individual investment recommendation.