U.S. tariffs on the auto sector would substantially raise the sticker price
If looming 25 per cent tariffs on the auto industry go ahead on April 3 as previously announced by the U.S. government, experts say they’ll have a huge impact on the price of cars for Canadians.
U.S. President Donald Trump’s administration announced last week that a 25 per cent tax on all fully-built vehicles imported into the U.S. would go into effect on April 3. The 25 per cent figure would also extend to some key auto parts, including engines, transmissions and electrical components, and the White House left the door open to a levy on more auto parts down the road.
Colin Mang, an assistant economics professor at McMaster University, says how the tariffs play out in the U.S. and how Canada reacts will impact how much the price of a car rises, but the dollar amount could increase anywhere from $1,000 to $8,000 Cdn.
“What we’re going to see is prices start to increase in the United States and that’s going to have spillover effects here in Canada as well, because the prices will track each other,” Mang said.
While there are still many variables at play, automotive industry experts say prices for many cars may rise significantly, although there are models that may not be affected.
Retaliatory tariffs by Canada would only add to the price increase, according to Mang. While there are about a dozen or so car models that are assembled in Canada that might not be as impacted by tariffs, the interconnected supply chain that sees car parts criss-cross North America many times before they end up in a vehicle will be affected.
Mang says Canada exports some 1.1 million cars to the U.S. each year, so tariffs on the domestic auto industry could mean potential job losses.
He noted that these changes would also undo the decades of work done since the inception of the 1965 Auto Pact, which sought to build a singular North American auto industry that both countries would benefit from.
Charles Bernard, lead economist with the Canadian Automobile Dealers Association, agrees that tariffs would be quickly followed by a price hike. He says the current supply of cars on the lot would cushion the price increase ever so slightly, but as soon as those cars are sold, the sticker price would go up.
“It would be a significant amount of money in a world where cars were already not cheap,” Bernard said.
Those looking to non-North American carmakers will also be out of luck, he says. Production for brands consumers might associate with Korea or Japan still often takes place in North America, so they’re likely to see the same kinds of increases, according to Bernard.
South Korean automaker Hyundai has already warned its prices could increase if the 25 per cent tariff by the U.S. goes into effect.
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