US automakers may accelerate production of higher-margin vehicles if the US raises tariffs on Canadian-built cars, parts and steel, according to Oxford Economics.
US president Donald Trump threatened earlier this week to double tariffs on these products to 50pc starting January 2027 after trade talks broke down on 21 August. Canada responded on 25 August with a retaliatory package, including a 25pc tariff on some US vehicles starting 8 September.
The North American auto industry is highly integrated, so additional tariffs would further disrupt trade and raise costs across the auto and steel supply chain.
More than half of the parts and components in Canadian-built vehicles originate in the US, the Canadian Vehicle Manufacturers' Association said.
Higher costs may push automakers to prioritize production of SUVs, pickup trucks and luxury cars, which tend to offer higher margins, Oxford Economics said.
Any move toward larger models could affect vehicle demand in both countries, sending more buyers to the used-car market and raising prices, Oxford Economics said.
Canadian exporters shipped roughly 80pc of their vehicles by volume to the US in 2025, accounting for 91pc of export value, while US vehicle exports to Canada made up 25pc of total US export volumes and 38pc of value, customs data show.
US used-vehicle sales reached 1.44mn units in July, slightly higher than in June and bucking typical seasonal declines, Cox Automotive said.
Honda, BMW, Stellantis, GM and Subaru declined to comment on the expected impact of the new tariffs, with one automaker noting that the tentative tariff is still four months away.
The Trump administration has often revised, delayed or withdrawn tariff measures after initial announcements.
Short-term focus for steel market participants remained elsewhere as buyers continued to grapple with a lack of domestic availability, while attempting to draw out details about 2027 contracts from suppliers.
