US-Canada trade war heats up as Trump threatens vehicle tariffs

The US-Canada trade war took a sharp turn this week as President Donald Trump threatened to raise tariffs on Canadian-made vehicles, prompting a fierce response from Ottawa and pushing bilateral relations to their lowest point in decades.

Carney draws a line in the sand

Canadian Prime Minister Mark Carney didn’t mince words. He accused Trump of deliberately trying to “destroy” Canada’s auto industry — a sector that employs roughly 125,000 workers directly and supports hundreds of thousands more in supply chains across Ontario and Quebec. Carney said Canada won’t return to formal trade negotiations until the White House shows up with what he called the “right attitude.”

That’s a significant escalation. Canada has historically been reluctant to walk away from the table entirely, but Carney appears to be betting that holding firm sends a stronger signal than endless rounds of talks that go nowhere.

What Trump is threatening

Trump has floated raising auto tariffs to as high as 50%, on top of existing levies that already sit at 25% for many Canadian goods. The current tariffs went into effect earlier this year and have already rattled automakers operating cross-border facilities — plants that were specifically built to exploit the integrated North American supply chain created under the old NAFTA deal and its successor, the USMCA.

Ford, General Motors, and Stellantis all run assembly operations on both sides of the border. A further tariff hike could make some of those Canadian plants uneconomical almost overnight. Industry analysts at RBC estimated last month that a 50% vehicle tariff could cost the Canadian auto sector up to $14 billion annually.

A relationship in freefall

The two countries traded nearly $900 billion in goods last year, making them each other’s largest trading partners. But that deep economic interdependence hasn’t stopped the relationship from deteriorating fast.

“We’ve never seen rhetoric like this between Ottawa and Washington,” said one senior trade official familiar with both governments’ positions. “And the concern is that even if a deal gets done eventually, the trust damage lasts much longer.”

So far, Canada has responded with retaliatory tariffs targeting about $30 billion in US goods, including orange juice from Florida, bourbon from Kentucky, and steel products. Yet those measures haven’t seemed to change Trump’s calculus.

What comes next

Neither side has scheduled any immediate talks. Carney is facing domestic pressure to act tough — Canadian public opinion has hardened significantly against the US since the tariff dispute began, with some polls showing a majority of Canadians now favor reducing economic dependence on their southern neighbor.

Still, a full decoupling of the two economies isn’t realistic in the near term. Too much infrastructure, too many supply chains, and too many jobs on both sides depend on the relationship working.

The next few weeks will be critical. Trump is expected to announce a broader tariff review in late May, and Canada will be watching closely to see whether Washington’s tone shifts — or gets worse.