As U.S. war plans go, there’s nothing secret about the one President Donald Trump has plotted for Canada’s auto sector.
From his vow to “crush” and “permanently shut down” vehicle manufacturing in this country to his barrage of tariffs – the latest being a 25-per-cent levy on imported cars and light trucks due to take effect next week – the signal is clear: There should only be one country on the continent that makes cars for Americans.
That zero sum, scorched-earth approach to America’s trade relationship with its former allies, Canada and Mexico, has rightly triggered alarm throughout the industry and at all political levels in this country, with federal Liberal Leader Mark Carney on Thursday calling the auto tariffs a “very direct attack.”
Will Mr. Trump get his way and fully drive vehicle production out of Canada? That’s unlikely, according to economists and industry watchers. Instead, the consensus view is that the President’s scheme will do little but push up costs, reduce consumer choice and put domestic automakers at a competitive disadvantage to their international rivals – in other words, Make North America’s Auto Industry Less Efficient Again.
Still, there’s a strong chance that Canada’s auto sector will shrink in a trade war, accelerating a decades-old trend that has seen the country shift away from its dependence on motor vehicle production. Other countries have followed the same trajectory, notably Australia, where the passenger auto industry vanished altogether last decade, with surprisingly less damage than initially feared.
Vehicles pass the General Motors assembly plant in Oshawa, Ont., in March, 2025. Oshawa, which once dubbed itself “the City that Moto-vates Canada” saw much of its auto sector vanish when GM shuttered a major assembly plant in 2018.Carlos Osorio/Reuters
On the surface, the stakes look manageable: Vehicle and parts production amounts to a sliver of Canada’s industrial gross domestic product and national job market – less than 1 per cent for both. But in certain pockets of the country, especially southern Ontario, any auto-related losses would be deeply felt in communities where families have long relied on the industry for middle-class jobs, even if those positions aren’t as bountiful as they once were.
“These are solid jobs and have been solid jobs in this community for more than 100 years, so to see someone blithely talking about getting rid of my auto sector really gets to me,” said Heather McMillan, a former auto worker in Oshawa, Ont., and now executive director of the Durham Workforce Authority, a not-for-profit labour organization.
Chrysler Pacificas are loaded onto a transport truck at the assembly plant in Windsor, Ont., in March, 2025. Windsor directly relies on the auto sector for nearly 8.4 per cent of jobs.Dax Melmer/The Globe and Mail
To hear Mr. Trump tell it, snatching auto production away from Canada is as simple as flipping a switch – “We’re going to have growth in the auto industry like nobody’s ever seen, plants are opening up all over the place” – but it wouldn’t be easy, or cheap, to replace a Canada-sized hole in the U.S. auto market.
Canada currently exports roughly 1.1 million vehicles annually to the United States, accounting for less than 10 per cent of cars and trucks sold south of the border.
To fill the gap left by Canada, automakers would need to build six new U.S. plants, according to a report by Toronto-Dominion Bank economists Marc Ercolao and Andrew Foran. Meanwhile, “full on-shoring of all non-U.S. production would require a 75-per-cent boost in U.S. production and more than US$50-billion in new investment.”
Jim Stanford, a labour economist with the Centre for Future Work, pegs the cost at closer to US$100-billion. “You’re talking about thirty years of an integrating supply chain based on thousands and thousands of discreet decisions by companies to locate particular facilities and products in different parts of the continent,” he said. “I just don’t think it’s physically possible within any of our lifetimes for the U.S. to fully repatriate the entire auto industry.”
Which explains why auto industry executives have been loath to entertain the idea, though they’re not ruling it out either.
If tariffs become permanent, “then there’s a whole bunch of different things that you have to think about in terms of where do you allocate plants, do you move plants, et cetera?” General Motors Co. chief financial officer Paul Jacobson told investors last month. “As much as the market is pricing in a big impact of tariffs and lost profitability, think about a world where we’re spending billions in capital, and then it ends. We can’t be whipsawing the business back and forth.”
Wild swings are something Canada’s auto sector has become accustomed to.
Over the past three decades, motor vehicle production in Canada plummeted from nearly three million cars and trucks in 2000 to 1.5 million in 2023, and the final tally for 2024 is expected to come in even lower at around 1.3 million, according to Ontario’s Trillium Network for Advanced Manufacturing.
Those declines are far sharper than what the U.S. experienced, while Mexico’s auto production has surged.
As a result of production declines, motor vehicle and parts manufacturing amounted to just 0.7 per cent of Canada’s industrial GDP last year, and direct employment in the industry made up an even smaller share of total jobs.
Where things get muddier is in the outsized impact the export of vehicles contributes to Canada’s GDP. The outbound trade in vehicles and parts was equivalent to 2.6 per cent of GDP last year, compared to 0.5 per cent in the U.S., according to Bank of Montreal senior economist Erik Johnson.
“Zoomed out, auto manufacturing is a small slice of the pie, but the issue is how concentrated that activity is,” said Mr. Johnson. “This hits really hard in parts of southwestern Ontario.”
It wasn’t long ago that Oshawa, which once dubbed itself “the City that Moto-vates Canada,” saw much of its auto sector vanish. In 2018 GM made the decision to shutter its sprawling assembly plant after operating in the city for a century.
By then, the plant’s workforce had shrunk to around 2,900 from more than 23,000 in the 1980s.
In 2021, GM reopened the plant to produce its Chevrolet Silverado pickup trucks, though the city’s dependence on the auto sector has waned: Motor vehicle and parts manufacturing accounted for 2.4 per cent of employment last year, down from nearly 6 per cent in 2007, according to Statistics Canada.
Louie Givelas has had a unique vantage point to the city’s shifting automotive fortunes. As the owner and chef at the Rainbow Family Restaurant, opened by his grandfather in 1958 in downtown Oshawa (the GMC Breakfast is a perennial favourite), he’s watched the changing face of diners as wave after wave of disruption hit the industry.
Whereas GM employees once filled the tables, diners today are more likely to be postsecondary students and professionals who commute to work in downtown Toronto.
“What I’ve learned from observing through my window in the kitchen at the customers coming in and going out is that Oshawa is a tough town,” he said. “Every time the city got knocked down, they bounced back.”
Other auto sector hubs in the province are more exposed to Mr. Trump’s actions. For instance, Windsor, Ont., across from Detroit, still directly relies on the sector for nearly 8.4 per cent of jobs.
Few in the city give any credence to the idea that Mr. Trump could permanently shut down the Canadian auto sector, but they worry the tariff chaos will lead to temporary shutdowns and could deter future investment in the region.
“The notion of wiping out the Canadian auto sector is impossible because the North American auto sector is so integrated,” said Ryan Donally, chief executive officer of the Windsor-Essex Chamber of Commerce, who said any such effort would lead to hundreds of thousands of job losses on both sides of the border. “But there is so much uncertainty right now that any decisions related to new automotive programs have been put on pause.”
Hundreds of Chevrolet Silverado trucks sit in the Auto Warehousing Company Canada lot in Oshawa. Canada currently exports roughly 1.1 million vehicles to the U.S., accounting for less than 10 per cent of cars and trucks sold south of the border annually.Shay Conroy/The Globe and Mail
There’s no question, though, that the auto tariffs will hurt. Over the long run, Canada’s real motor vehicle and parts output would shrink by 22.4 per cent, the biggest hit of any country, while boosting output in the U.S. by 13.7 per cent, according to an analysis by the Budget Lab at Yale University. That’s assuming Canada does not retaliate with its own countertariffs, as it almost certainly will. In that case, Canadian output would fall even further, by 30.8 per cent, while output in the U.S. would effectively flatline – Canada’s auto sector would be severely damaged, but that would accomplish nothing for the U.S. industry.
As Canada’s auto sector endures Mr. Trump’s threats, the demise of Australia’s passenger vehicle manufacturing sector offers insights for how an economy can adapt.
Australia’s auto sector collapsed after steep tariffs that had been in place from the 1950s to the 1980s to keep foreign-made vehicles away from its shores were largely withdrawn. Once those tariffs were gone, the industry was no longer feasible. Holden, a GM subsidiary that had made vehicles in Australia for 70 years, closed its doors in 2017, with Toyota Motor Corp., Ford Motor Co., Chrysler and others already having shut down production in Australia.
At the time, some analysts warned darkly that hundreds of thousands of jobs would be permanently erased from the economy. Instead, researchers who tracked the later careers of laid-off auto workers found most were absorbed into Australia’s booming job market.
It’s also true that the complete death of the Australian auto industry has been exaggerated. The parts supply chain has grown since the demise of large-scale automotive assembly, having evolved to serve new markets such as recreational vehicles, buses and commercial trucks.
Experts who’ve studied Australia’s auto sector believe the industry in Canada’s will prove resilient.
“Australia is at the margins of the inhabited part of the Earth, but you’re a short drive from Detroit and that huge market that is the U.S.,” said Andrew Beer, a business professor at the University of South Australia. “Once the tariffs were removed, it made absolutely no sense to have a domestic car industry here. But Canada’s natural geography means there’ll always be some form of car manufacturing, even if it’s only parts manufacturing.”
Unifor auto workers stand behind Prime Minister Mark Carney as he speaks near at the Ambassador Bridge in Windsor, Ont., on Wednesday. Mr. Carney pledged to build an “all-in-Canada auto manufacturing network.”Frank Gunn/The Canadian Press
Visions for the sector’s future are emerging. Mr. Carney pledged this week to build an “all-in-Canada auto manufacturing network.” Meanwhile, Mr. Stanford said with Canadians buying $100-billion worth of vehicles each year, the next federal government will invariably take a page from Mr. Trump’s book and “demand some kind of manufacturing footprint that’s broadly in line with the domestic market.”
One thing is certain, while Mr. Trump’s threat to wipe out Canada’s auto sector is unlikely, the industry “will not look the same as it did prior to the current disruption,” said Mr. Johnson.
“Canada’s auto sector will survive. It will involve a lot of pain, but I think there are good indications we’ll still be making automobiles even in a tariff world,” he said. “These plants are long-lived capital decisions that are going to outlive the next 3.5 years of the Trump administration, no matter which direction they choose to take on tariffs.”