WASHINGTON (Realist English). While diplomats on both sides of the border try to prevent an escalation of the trade war, US automakers are facing a challenge that goes far beyond tariff disputes with Ottawa.
A 22% drop in exports to Canada, the threat of 50% tariffs and uncertainty over the USMCA are just the tip of the iceberg. A far more serious threat to Ford, General Motors and Stellantis is the structural reorganisation of the global market, where China and electric vehicles are changing the rules faster than Washington can rewrite trade agreements.
Escalation of the trade conflict
In July 2026, the Trump administration announced the imposition of 50% tariffs on Canadian cars and auto parts, activating a rarely used tool – Section 338 of the 1930 Tariff Act.
The trigger was complaints about Canada’s “discriminatory measures,” including local sales quotas and additional standards for US pickups. In response, Prime Minister Mark Carney vowed to defend national interests “at any cost.”
By 19 August, talks had reached an impasse. Two hours before the tariffs were due to take effect, Trump suspended them for 72 hours. By that point, the sides were discussing a reduction in the tariff from 25% to 15% – but the dispute centred on the calculation methodology: Washington insisted on deducting only US content, while Canada demanded that all North American components be taken into account.
By the end of the week, the sides said they were close to a deal that could reduce tariffs on steel and aluminium to 25% and on cars to 15%.
System breakdown: USMCA in question
The conflict coincides with a review of the USMCA. On 1 July 2026, Trump refused to extend the agreement, keeping it in force only temporarily. In response, US automakers, through the American Automotive Policy Council (AAPC) – which includes Ford, GM and Stellantis – called for a “quick and long-term solution.” The administration put forward tough demands: raise North American content from 75% to 82%, with half of the components required to be of US origin.
Canada rejected these conditions. For the province of Ontario, where key GM and Stellantis plants are located, higher US content requirements would mean the destruction of the established cross-border supply chain and massive job losses. Stellantis plants in Brampton are already idle and put up for sale, with Jeep production moved to the US; GM closed its Ingersoll plant and cut production in Oshawa; Ford suspended its Oakville plant.
Market decline and Canada’s response
The losses are already evident. In the 12 months to March 2026, US car imports to Canada fell by 22%.
The share of US-made cars on the Canadian market fell to a historic low of just 36% in 2025, compared to stable levels of the previous decade. In response, Canada imposed 25% tariffs on US cars, exempting manufacturers that invest in Canadian production.
| Indicator | Value |
| US auto imports to Canada decline (to March 2026) | -22 % |
| US car market share in Canada (2025) | 36 % |
| Proposed US tariff on Canadian cars | 15–50% |
| Canadian retaliatory tariff on US cars | 25 % |
In early 2026, Ottawa took an unprecedented step: an agreement with China opening the Canadian market to Chinese electric vehicles. The share of Chinese cars is still small – less than 3% of the market – but the symbolic signal was taken extremely seriously in Detroit.
As University of Michigan professor Erik Gordon put it, there is a “real danger that the market for US automakers will shrink to the US and only that part of it that wants large SUVs and pickups.”
Expert opinion
A senior automotive industry analyst (Detroit) told the press:
“Even if Trump and Carney reach a deal, it won’t solve the main problem. US automakers are losing ground around the world – in Asia, Europe and Latin America.
Chinese companies are expanding their presence everywhere, and electric vehicles are making Ford and GM’s traditional competitive advantages increasingly irrelevant. The war with Canada is just a symptom. The real challenge is whether the US auto industry can survive the structural reorganisation of the global market, or whether it really will become a producer of pickups for the domestic market.”
A world worse than war
The escalation with Canada has exposed a fundamental vulnerability of the US auto industry. For years, Ford, GM and Stellantis relied on an integrated North American production network, where components flowed freely across borders. Now that system is cracking at the seams.
But even a full settlement with Ottawa will not restore US automakers’ lost positions in global markets. Chinese companies are advancing on all fronts, and electric vehicles are betting on technologies in which Detroit has traditionally lagged behind. As The New York Times notes, US trade policy has damaged Canada’s automotive industry and pushed the country towards an agreement that will make it easier for Chinese companies to sell cars in Canada.
US automakers risk being trapped: their North American supply chain depends on peace with Canada, but even that peace does not guarantee them a future in a world where China and electric vehicles dictate new rules.
