While Canada remains the United States’ largest export customer, the 10% decline in imports from the United States reflects higher Canadian import tariffs (in response to Trump’s increases) and a slight appreciation of the U.S. dollar. These changes have made U.S.-sourced vehicles less affordable.
Overall, Canada’s trade balance with the United States has deteriorated by $11.1 billion. Mexico’s trade performance has been the exact opposite.
Based on negotiations with the Chinese government, Canada has agreed to a sales quota of China-sourced vehicles starting March 1 of this year. The intent of the policy is to provide Canadian consumers with more affordable battery-electric vehicles. The restrictions of the tariff-rate quota system are severe:
There is a quota limit of 49,000 imported vehicles in the first 12 months at a tariff rate of 6.1%. The quota limit grows by 6.5% each year through 2030. This would imply 65,000 to 70,000 vehicles by the end of the decade. Any China-sourced imports above the quota would pay a tariff of 106.1%.
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