American car buyers could be hit with an unwelcome price shock if President Donald Trump follows through on his threat to double tariffs on Canadian cars, trucks and auto parts to 50 percent next year.
Trump announced the threat on Monday, writing on Truth Social that tariffs on ‘all Cars, Trucks, both large and small, Automotive Parts, and Steel’ would rise from 25 percent to 50 percent.
Trump said the higher tariffs would take effect on January 1, 2027, escalating an already bitter trade dispute with one of America’s biggest trading partners.
The deep integration of North American auto manufacturing means that almost no cars sold in the US are 100 percent made in America.
Auto parts and sub-assemblies crisscross the Canada-US border – and the Mexico-US border – throughout the manufacturing process, so the tariff impact would certainly not be limited to vehicles that see final assembly in Canada.
Automakers could face higher costs for parts, components and finished vehicles – costs that can ultimately feed through to consumers in the form of higher prices.
According to an analysis by Wolfe Research from the first round of Trump tariffs in 2025, average US retail car prices would have risen by $3,000 from the administration’s 25 percent tariff on Canadian autos – suggesting that could be at least $6,000 this time around, if not more.
‘In the event of strong counteractions, severe trade dislocations and significant economic consequences would occur, leading to collapsing demand in all three countries,’ TD Economics wrote of last year’s round of 25 percent tariffs – suggesting that this week’s version could be even more harmful.