Tariffs, Trade Wars, and the Auto Industry: The Elephant in the Room
“A year ago, we asked how tariffs might affect our industry. Today we have a clearer answer…”
It's been just over a year since Trump's tariffs on Canadian products went into effect. Then, shortly after, tariffs were also levied on nearly all US foreign trading partners.
How are you doing?
As expected, I see that we, on the front line, have adapted to the higher prices and the reduction of product choices.
We must commend our supply line, specifically our jobbers and distribution networks, for their diligent work in keeping the shelves full.
But, further upstream in our automotive industry, things are not going so well. For them, the changes are not so easy to adapt to.
We've already seen in the U.S.A. that major vehicle manufacturers, dependent on imported products from Canada and other countries, have cut production and laid off staff. Some have left that market altogether. Here in Canada, our manufacturers, totally dependent on these US customers, have also reduced production, cut staff levels, and some have closed their doors forever.
Seeing the far-reaching damages caused by these tariffs (taxes), one would assume that logical reasoning would prevail, but Donald Trump, ignoring any advice, has stayed the course for his own private agenda, whatever that might be.
It took multiple lawsuits and the US court system to sort out the legalities, and then, finally, the Supreme Court of the United States ruled that the broad tariff measures introduced under Donald Trump exceeded executive authority under the statutes used to justify them. The decision called into question the legality of those sweeping tariffs. https://globalnews.ca/news/11675702/donald-trump-tariffs-us-supreme-court-ruling/
That might have signaled a cooling of tensions.
Instead, it triggered a new phase.
In response, alternative tariff measures were announced under a different statutory authority, keeping uncertainty alive in cross-border trade.
At the same time, President Trump publicly escalated his rhetoric toward Canadian leadership, including pointed remarks and ultimatums directed at Mark Carney. Canada’s response has been measured but firm, NO — applying targeted counter-tariffs on selected U.S. exports and signaling tighter control over our key resource channels.
I don't think Trump was prepared for such a quick response, leadership, and intelligence from Canada's Mark Carney to not only decisively shut down his vision of Canada becoming a 51st state, but to totally change the game on the world's stage of commerce to Canada's benefit.
The legal arguments are continuing to unfold in courtrooms.
But the economic consequences are unfolding in real time.
Let's Look at the Landscape and Where Do We Stand?
Before reacting emotionally to political headlines, it’s worth grounding ourselves in facts.
The Automotive Industry is a major driving force behind our economy, and when the media turns its attention to it, it focuses directly on new-vehicle assembly plants along with the supporting product manufacturing required for assemblies.
So, let's take a closer look.
Canada’s auto parts manufacturing sector is not small or fragile. It is a major industry — roughly 1,000 companies nationwide — with a heavy concentration in Ontario. Large Tier 1 suppliers such as Magna International, Linamar, and Martinrea International anchor the sector.
These firms supply major OEMs across North America and beyond. Approximately 85% of Canadian auto parts production is exported, with the remainding 15% reserved for the domestic market.
That statistic alone tells us something highly important.
Yes, this sector is deeply integrated into continental supply chains, and that integration may have been a strength for decades. But that close dependency has also created exposure, one that is presently being exploited through tariffs.
When cross-border policy becomes unstable, the impact does not remain theoretical. It directly affects the entire supply chain, from vehicle manufacturing to consumer products, and ultimately our national economy.
When 85% of production depends on export markets — primarily the United States — even modest policy swings can:
-
delay investment decisions,
-
alter sourcing contracts,
-
compress margins,
-
or redirect future production to jurisdictions perceived as more stable.
Even entertaining the thought of sourcing new markets for these products outside North America is not an option, as we are tied directly to North American vehicle production.
Yes, tier 1 suppliers may temporarily absorb volatility through scale, but smaller manufacturers and downstream distributors have far less room to maneuver.
And, yes, Canada has made strides to demonstrate to the world that our market is strong and stable, without being dominated by political instability.
The world has responded positively, and the future looks great....for our major OEM players and direct support businesses.
But vehicle manufacturing is not the primary force driving our automotive economy.
The Elephant In The Room
Here are a couple of clues.
(First, it's difficult to find reliable statistics on the Canadian marketplace, so we'll use statistics from our partners to the south, which closely mirror our own.)
- The latest statistic shows that the average age of the U.S. vehicle fleet reached a record high of 12.8 years, with passenger cars leading at 14.5 years for 2025.
- Add to that, the average age of new vehicle parts' 'planned obsolescence' programs, which could range from a low of 3 years to a high of 10 years, depending on the product.
So, who's really taking care of the Automotive Industry?
If you guessed the Automotive Aftermarket, you would be correct.
Even though the OEM portion of the automotive industry has taken center stage in the media, it is overshadowed by the sheer immensity of the aftermarket industry and what it contributes to the GDP.
For those of you who are not fully aware of the importance this sector has on the economy, please read We are at the Core of the Automotive Aftermarket
The automotive aftermarket has always operated as its own ecosystem, separate from the OEM supply chain. That independence has been one of its strengths. But in these times of global instability, it has also exposed our vulnerability to risks that larger integrated manufacturers can absorb more easily.
This independence has become our 'Achilles heel'.
The tariffs, no doubt, have taken an accelerated toll for one main reason: they have exposed our vulnerability.
If the 85/15 export-to-domestic-market production ratio is even close to what is happening in OEM parts production, we definitely have ourselves a serious uphill battle.
The 85/15 percentage split between exports and domestic is not destiny — it’s the result of decades of decisions.
When 85% of your production is focused on export markets, domestic stability becomes secondary, which we have experienced firsthand.
That’s not a criticism.
It’s a structural reality.
And structural realities don’t change because we ignore them.
They can only change when we deliberately strengthen the parts of the system we can influence.
Some would suggest we need to explore different or larger domestic markets, but I disagree. We haven't even succeeded in securing our own domestic market, here at home.
What it needs is better domestic coordination.
We already have the major components in place — manufacturers, supply networks, distributors, shops, and technicians — through which the money ultimately enters the system.
The one component that's missing is a centralized commercial communications network that serves as a hub connecting all facets of this vast industry together, under one roof.
The premise is simple and logical.
But the ramifications are huge with endless possibilities.
Is this doable? And, how long would it take to create such a project?
It's already created and published, and it's a continuous work in progress.
It's called The Automotive Service Business Network. (www.asbn.ca)
There's just so much more to talk about.
What can we do?
Strengthen our own industry.
The automotive aftermarket has always been independent, resourceful, and resilient. But independence does not mean isolation. In times like these, communication and coordination across our industry become more important than ever.
Manufacturers, suppliers, distributors, and repair professionals all depend on the same marketplace — and the same customers.
The stronger our connections are, the stronger our industry becomes.
That’s exactly why The Automotive Service Business Network (ASBN) was created.
If you are part of the automotive industry in any commercial capacity, I invite you to visit the site, explore what’s already there, and open your own account to become part of the conversation.
There’s something here for everyone.
See you there.
As Canadians, we don’t follow. We lead.
And when something critical is missing, we build it.
That’s why ASBN exists.
