Canadian Prime Minister Mark Carney said that Canada's old relationship with the United States, "based on deepening integration of our economies and tight security and military cooperation, is over".

Speaking to reporters in Ottawa after a cabinet meeting, Carney said Canadians must "fundamentally reimagine our economy" in the face of US President Donald Trump's tariffs.

He said Canada would respond with retaliatory tariffs that will have "maximum impact" on the US.

Trump announced on Wednesday he would target imported vehicles and vehicle parts with a 25% tax, stating: "This is permanent."

Carney, the Liberal Party leader, called the original Canada-US Automotive Products Agreement signed in 1965 the most important deal in his lifetime.

"That's finished with these tariffs," he said in French.

He continued that Canada can sustain an auto industry with the US tariffs provided the government and business community work to "reimagine" and "retool" the industry.

Canada needs to build an economy Canadians can control, he said, and that would include rethinking it's trade relationship with other partners.

It remains to be seen whether Canadians can have a strong trading relationship with the United States going forward, he added.

Carney has switched his campaign plans ahead of next month's general election to confront the latest import duties.

The US has already partially imposed a blanket 25% tariff on Canadian goods, along with a 25% duty on all aluminium and steel imports. Canada has so far retaliated with about C$60bn ($42bn; £32bn) of tariffs on US goods.

The new car tariffs will come into effect on 2 April, with charges on businesses importing vehicles starting the next day, the White House said. Taxes on parts are set to start in May or later.

Early on Thursday morning, Trump warned Canada and the EU against joining forces versus the US in the trade war.

"If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both," he posted on his Truth Social platform.

Carney met his ministers in Ottawa on Thursday morning to "discuss trade options". He had originally been scheduled to campaign in Quebec.

He said during his press conference that President Trump had reached out to him last night to schedule a call, and that it would take place in the "next day or two".

If it takes place, this would be the first call between the pair.

Pierre Poilievre, leader of the Conservatives, the main opposition party, called the tariffs "unjustified and unprovoked".

The NDP, a left-wing party that previously helped prop up the minority Liberal government of ex-PM Justin Trudeau, also switched its campaign plans on Thursday.

Jagmeet Singh, the NDP leader, spent the day meeting union leaders and car workers in Windsor, Ontario, an auto manufacturing hub across from Detroit, Michigan.

He said the US tariffs are a "betrayal" against a close ally, saying that "Donald Trump has started an illegal trade war with Canada" for "absolutely no reason".

He said any auto company that moves their operations out of Canada because of the tariffs should be blocked from selling cars in the country.

Canadians go to the polls on 28 April.

The US imported about eight million cars last year - accounting for about $240bn in trade and roughly half of overall sales.

Earlier this month, after he became Liberal leader and before he was sworn in as prime minister, Carney gave a victory speech in which he lambasted the US president.

"A person who worships at the altar of Donald Trump will kneel before him, not stand up to him," he said, while assailing his main rival, Poilievre.

Mexico is the top supplier of cars to the US, followed by South Korea, Japan, Canada and Germany.

Mexican President Claudia Sheinbaum, in a news conference on Thursday morning, declined to comment directly on the new auto tariffs.

She vowed her government would "always defend Mexico", and fight to maintain job creation and protect Mexican companies affected by import taxes.

She said Mexico would provide an "integral response" to the Trump administration's tariffs on 3 April, the day after many are due to come into effect.

Sheinbaum has repeatedly noted that many US car companies have operations in both Mexico and Canada, which are bound by a North American free trade agreement that Trump himself negotiated during his first term in the White House.

"Of course, there shouldn't be tariffs," she said on Thursday. "That's the essence of the free trade agreement."

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Canadian Prime Minister Mark Carney's declaration that the traditional close ties between Canada and the United States are "over" signifies a pivotal shift in the bilateral relationship, primarily due to recent U.S. trade policies. President Donald Trump's imposition of a 25% tariff on foreign-made car imports has been perceived by Canada as a direct economic threat, especially to its auto industry, which is deeply integrated with the U.S. market. ​AP News+3Financial Times+3The Guardian+3

In response, Prime Minister Carney has announced intentions to renegotiate trade agreements, aiming to reduce Canada's economic dependence on the U.S. and seek more reliable trading partners. This includes restructuring Canada's auto sector, investing in domestic supply chains, and exploring new international trade relationships. ​Financial Times+1Politico+1

The broader implications of this shift could lead to significant changes in North American trade dynamics. Canada's retaliatory measures may prompt further economic tensions, potentially affecting various industries and leading to increased prices for consumers in both countries. Moreover, this development has garnered international attention, with leaders from Japan, Germany, France, and the EU expressing criticism of the U.S. tariffs and considering coordinated responses. ​WikipediaThe Guardian

Domestically, Carney's stance has sparked discussions about Canada's sovereignty and economic resilience. His administration is focusing on policies to support affected industries and workers, including the establishment of a CA$2 billion fund to bolster jobs in the Canadian auto sector. ​Latest news & breaking headlinesAP News

While the full ramifications of this evolving situation remain uncertain, it is clear that Canada's approach under Prime Minister Carney marks a departure from previous economic and diplomatic strategies, signaling a new era in Canada-U.S. relations.

The fallout from Mark Carney’s stance on Canada-U.S. relations, particularly in response to U.S. auto tariffs, will likely hurt several groups on both sides of the border:

1. Canadian Auto Industry & Workers

• U.S. tariffs on Canadian car imports will make Canadian-made vehicles more expensive for American buyers.

• This could lead to reduced sales, job losses, and plant closures in Canada.

• The Canadian government has announced support for the sector, but job security remains uncertain.

2. U.S. Auto Consumers & Dealers

• Tariffs typically increase car prices, meaning U.S. buyers could pay more for vehicles imported from Canada.

• Auto dealers, especially those relying on Canadian supply chains, may struggle with higher costs and reduced inventory.

3. North American Supply Chains

• The auto industry is highly integrated across Canada, the U.S., and Mexico.

• Disruptions could cause inefficiencies, forcing companies to find costlier alternatives.

• Delays and rising costs might affect manufacturers and suppliers.

4. Canadian & U.S. Businesses Dependent on Trade

• Other industries beyond auto (e.g., agriculture, manufacturing) that depend on cross-border trade could also suffer from potential retaliatory measures.

• Uncertainty in trade agreements may discourage investment and economic growth.

5. Broader Canadian & U.S. Economy

• Rising trade tensions could slow economic growth, increase inflation, and reduce job opportunities.

• If Canada moves towards trade diversification, U.S. businesses relying on Canadian imports might need to source from costlier markets.

6. Political Leaders & Governments

• Carney’s government will face pressure to shield Canadian workers and businesses from economic shocks.

• The Biden or Trump administration (depending on leadership changes) will have to handle backlash from both industry leaders and voters affected by price hikes or job losses.

Overall, while Canada is aiming to reduce its reliance on the U.S., the transition could cause significant short-term disruptions, with auto workers, businesses, and consumers being the hardest hit.

The imposition of a 25% tariff on imported automobiles and parts by the U.S. is poised to have extensive repercussions across various sectors in both Canada and the United States.​Barron's+1People.com+1

1. Impact on the Canadian Auto Industry and Workforce

The Canadian auto sector, deeply integrated with the U.S. market, faces significant challenges due to these tariffs. Ontario, the heart of Canada's automotive industry, hosts major manufacturers like Ford, General Motors, Stellantis, Toyota, and Honda. These companies produced approximately 1.54 million light-duty vehicles in 2024, primarily for export to the U.S. The tariffs threaten this production model, potentially leading to reduced operations, layoffs, and plant closures. Flavio Volpe, president of the Automotive Parts Manufacturers' Association, emphasized that a 25% tariff could be devastating, as auto parts often cross the border multiple times during manufacturing. ​NBC BostonBNN+1NBC Boston+1

2. Consequences for U.S. Auto Consumers and Dealerships

For American consumers, the tariffs are expected to drive up vehicle prices significantly. Analyses suggest that the cost of imported vehicles could rise by $5,000 to $15,000, while even domestically produced cars might see increases of $3,000 to $8,000 due to the reliance on imported parts. This surge in prices may lead to a decrease in new vehicle sales, adversely affecting dealerships and potentially resulting in job losses within the retail sector. ​Investopedia

3. Disruption of North American Supply Chains

The North American auto industry operates on a highly integrated supply chain, with components frequently crossing borders during the production process. The introduction of tariffs disrupts this system, causing inefficiencies and increased production costs. Such disruptions may compel manufacturers to seek alternative, potentially more expensive, supply sources, further escalating vehicle prices and affecting profitability. ​BNN

4. Broader Economic Implications

Beyond the auto industry, these tariffs have the potential to slow economic growth and contribute to inflation. The Center for Automotive Research projected that a 25% tariff could lead to a reduction of 2 million units in new vehicle sales, nearly 715,000 job losses, and a $59.2 billion decrease in GDP. Additionally, increased vehicle prices may strain consumer finances, leading to reduced spending in other sectors. ​InvestopediaNBC Boston+2NADA+2NADA+2

5. Political and Trade Relations

Politically, the tariffs have strained Canada-U.S. relations. Canadian Prime Minister Mark Carney has signaled a shift away from reliance on the U.S. as a trading partner, advocating for economic restructuring and diversification. This development may lead to renegotiations of trade agreements and a realignment of international trade partnerships, with long-term implications for both economies. ​

In summary, the U.S. auto tariffs are set to have profound and multifaceted impacts, affecting industries, consumers, and economies on both sides of the border.

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