Canada Exempt from U.S. Reciprocal Tariffs, but Auto Tariffs Hit Tonight

U.S. President Donald Trump’s latest tariff announcement has delivered a mixed outcome for Canada: while the country escaped broad U.S. “reciprocal global tariffs” on April 2, a 25% tariff on foreign-made cars and light trucks will still strike the Canadian auto industry starting at midnight tonight. Prime Minister Mark Carney has vowed to fight back, as duties on non-compliant Canada-United States-Mexico Agreement (CUSMA) goods, including autos, aluminum, and steel—imposed last month—persist.

PM Carney has vowed to retaliate. “We are going to fight these tariffs with countermeasures,” he said, heading to an emergency cabinet meeting. He noted U.S. signals of potential tariffs on pharmaceuticals, lumber, and semiconductors, adding, “In a crisis, it’s important to come together. It’s essential to act with purpose and with force, and that’s what we’ll do.”

Carney promised further updates after stakeholder meetings tonight and tomorrow. Ontario Premier Doug Ford, meanwhile, warned of assembly line shutdowns within 10 days if the tariffs persist, rejecting anything short of “zero tariffs.”

The White House clarified on March 27 that CUSMA-compliant vehicles and parts from Canada are exempt, but only until the U.S. establishes a process to tax non-American components within these products. Non-compliant exports face the 25% tariff starting tonight, threatening Canada’s auto sector, which employs over 500,000 people and accounts for 10% of manufacturing GDP.

With 80-90% of Canadian auto production exported to the U.S., the integrated North American supply chain is at risk. Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, told media on March 26 that the uncertainty is “paralyzing” for investors and could halt production.

The confusion stems from a temporary reprieve on March 5, when Trump exempted CUSMA-compliant automakers for one month after talks with Ford, General Motors, and Stellantis. That grace period ends tonight, and the partial exemption—covering only compliant goods—leaves an estimated $1 billion USD in daily exports vulnerable. Canada’s planned retaliatory tariffs on $107 billion USD of U.S. goods, delayed until today, now loom as a likely response.

As the deadline nears, Canadian officials are in urgent talks with Washington, seeking clarity or an extension. The stakes are high: a trade war with the U.S., Canada’s largest partner, could push the economy into recession. For now, Carney’s resolve signals a united front, but the auto industry—and the nation—braces for a turbulent road ahead.