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APMA: Impact of Newly Imposed U.S. Tariffs on Canadian Auto Parts Industry

On February 1, 2025, U.S. President Donald Trump announced the imposition of significant tariffs affecting our industry. Effective February 4, 2025, a 25% tariff will be applied to all Canadian exports to the United States, with a reduced 10% tariff on Canadian energy products. These measures have been enacted under the International Emergency Economic Powers Act (IEEPA), citing concerns over illegal immigration and drug trafficking as national security threats.

Legislative Basis:

The IEEPA grants the U.S. President authority to regulate international commerce after declaring a national emergency in response to any unusual and extraordinary threat to the country. In this instance, the administration has linked the tariffs to issues of border security and the opioid crisis.

Potential Impacts on the Automotive Industry:

Given the deeply integrated nature of North American supply chains, these tariffs introduce severe risks to the stability of the auto sector, including:

  • Increased Production Costs: U.S. manufacturers relying on Canadian parts will face higher costs, leading to increased vehicle prices for consumers.
  • Supply Chain Disruptions: The tariffs may cause immediate bottlenecks in cross-border shipments, forcing companies to reconfigure sourcing strategies.
  • Competitive Disadvantages: Higher input costs could render North American auto production less competitive globally.
  • Risk of Industry Shutdowns: The auto sector operates on just-in-time logistics, meaning sustained disruptions could force temporary closures, similar to:
    • March 2020 – COVID-19 Pandemic: Factory shutdowns resulted in widespread layoffs and production stoppages.
    • February 2022 – Ambassador Bridge Blockade: A six-day disruption at this critical trade corridor, which handles $400 million in daily trade, caused assembly plants on both sides of the border to idle operations, leading to millions in losses.

With key automotive supply routes now under threat, companies must prepare for potential temporary closures, workforce disruptions, and severe economic fallout if these tariffs remain in place.

APMA’s Leadership and Government Response:

As a member of the Prime Minister’s Council on Canada-U.S. Relations, I am directly engaged with federal leadership in discussions on how best to respond to this challenge. Additionally, the APMA is in constant contact with the Premier of Ontario, who has reaffirmed the province’s commitment to supporting the industry through this difficult period.

Both the federal and provincial governments are working on targeted measures to assist the automotive and manufacturing sectors, including:

  1. Financial Assistance Programs: Potential support for businesses affected by the tariffs.
  2. Trade Diversification Efforts: Expanding export opportunities beyond the U.S. market.
  3. Negotiation Strategies: Advocating for exemptions and reductions through diplomatic channels.
  4. Domestic Investment Support: Accelerating incentives for domestic auto and EV production to maintain Ontario’s competitive advantage.

APMA’s Role and Industry Recommendations:

The APMA is working around the clock to advocate for urgent relief and strategic responses to these tariffs. We recommend that members:

  • Assess Supply Chains: Identify vulnerabilities and explore contingency plans for alternative sourcing and logistics.
  • Stay Informed: Follow policy updates and government responses to these tariffs.
  • Engage in Advocacy: Support industry-wide efforts to push back against these harmful trade measures.

We are committed to ensuring that our industry remains strong and resilient through this period of uncertainty. Please do not hesitate to reach out with concerns or for further information. You can connect with Parm Dhillon, Director, Member Relations at pdhillon@apma.ca.

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