According to Bloomberg, Canadian Prime Minister Mark Carney has announced that the Canadian government will allow automakers to import U.S.-made cars and trucks into Canada duty-free, provided these manufacturers continue to produce vehicles in Canada. This move offers some relief to companies like General Motors and Stellantis, which are caught in the crossfire of trade tensions. These automakers have assembly plants in Ontario, Canada, but still need to export a significant number of vehicles from the U.S. to Canada.

Last week, Carney announced retaliatory tariffs of up to 25% on U.S.-made vehicles, a response to U.S. President Donald Trump’s earlier tariffs on foreign automobiles. Canada, the U.S., and Mexico have maintained a highly integrated automotive supply chain for decades. Most cars and trucks produced in Canada are exported to the U.S., while U.S.-made vehicles dominate the sales of Canadian car dealerships.

At a press conference, Carney stated, “Automakers that continue to produce, employ, and invest in Canada will be exempt from Canada’s retaliatory tariffs.” However, the Canadian Ministry of Finance added in a press release that if automakers reduce production or investment in Canada, the number of vehicles they are allowed to import duty-free will be correspondingly reduced.

This policy aims to protect Canada’s automotive industry while navigating the complexities of international trade disputes.

The Canadian government’s recent announcement comes at a time of growing concerns that automakers might withdraw production from Canada due to the tariff policies implemented by the Trump administration. It has been reported that Stellantis has temporarily shut down its assembly plant in Windsor, Ontario, which produces Chrysler and Dodge models. Meanwhile, General Motors has stated that one of its Canadian factories will halt production for several months due to weak demand for electric vans. Although Ford has an assembly plant in the Toronto suburbs, it is currently not operational. Additionally, according to Nikkei, Honda is considering relocating some of its car production from Canada and Mexico to the United States, aiming to achieve 90% localization of production for vehicles sold in the U.S. market.

Mark Carney has revealed that the Canadian government has engaged in multiple discussions with executives from global automakers. “We are closely monitoring issues related to auto tariffs,” he said. Carney also mentioned his commitment to establishing a CAD 2 billion fund to strengthen Canada’s domestic automotive supply chain. He emphasized that, regardless of who wins the 2025 Canadian federal election, a broader strategy to resolve tariff disputes with Trump will be necessary. Carney criticized the Trump administration’s auto import tariffs, stating that they would ultimately increase vehicle costs for consumers in both the U.S. and Canada. “This policy is misguided and destined to fail,” he remarked. He also noted that there are signs the Trump administration is reassessing some of its tariff measures and may make adjustments.

In the 2025 Canadian federal election, Pierre Poilievre, the leader of the Conservative Party and a key competitor to Mark Carney, has also made significant promises regarding trade policies. Poilievre has pledged that if elected, he will negotiate with the Trump administration on tariff issues and propose the elimination of the federal sales tax on new vehicles produced in Canada. This move aims to support the domestic automotive industry and enhance economic competitiveness.

Meanwhile, the Canadian government has announced a temporary six-month tariff exemption on certain goods imported from the United States. This exemption applies to products used in manufacturing, processing, food and beverage packaging, as well as critical materials related to public health goals and national security strategies. Currently, Canada imposes a 25% retaliatory tariff on approximately $60 billion worth of U.S. imports (excluding automotive products). These tariffs primarily target steel and aluminum but also extend to a wide range of items, including tools, equipment, computers, and consumer goods.

The Canadian government emphasized that the tariff exemption measures, announced on April 15, will provide much-needed relief to domestic businesses reliant on U.S. imports for raw materials and equipment. Additionally, these measures will benefit essential public service institutions such as hospitals, long-term care facilities, and fire departments, ensuring they have access to necessary resources during this period.