Rush hour traffic crawling along the 401 during evening rush, seen from the Don Mills Road overpass, on Oct. 15, 2024.Fred Lum/The Globe and Mail
Auto-market analysts say Canada’s 25-per-cent tariff on U.S.-made vehicles has the potential to increase prices not only for cars affected by the levy, but also for non-tariffed cars and used vehicles as consumers try to avoid the tariff.
But there are still many unknowns around the way these price increases will play out, especially because the supply of new cars already in the country is enough to last for roughly 67 days, said Baris Akyurek, vice-president of insights and intelligence at Autotrader.ca. That means consumers have some time before tariffs begin to impact prices.
The Canadian countertariff went into effect Wednesday morning in response to U.S. President Donald Trump’s tariff on Canadian autos. Mr. Akyurek said various studies have shown that the price of new vehicles affected by the tariff could increase $3,000 to $12,000 in Canada as a result of the trade war.
“If the price of new vehicles increase, what we expect to see is the demand within the new car segment will shift to non-tariffed cars, which may have an impact on their prices as well,” said Mr. Akyurek.
Up to 60 per cent of cars purchased in Canada each year are imported from the United States, according to the Automotive Parts Manufacturers’ Association. The 25-per-cent tariff will only be on the portion of U.S. content in a car that is compliant with the United States-Mexico-Canada trade agreement, meaning a much lower levy than 25 per cent could be implemented. Non-USMCA compliant cars will face the full 25-per-cent tariff.
The auto sector will also be impacted by aluminum and steel tariffs, which the U.S. has implemented and the Canadian government has responded to with countertariffs.
Consumers are bound to see sticker prices rise, but Charles Bernard, lead economist with the Canadian Automobile Dealers Association, said the amount remains unclear because of the sheer number of variables.
He said certain brands, such as those in the sub-luxury class could try to absorb the increased costs in hopes that the tariffs are short-lived to prevent their prices increasing to a point in which they are now competing with luxury cars.
Mr. Bernard said some brands or individual dealers may have much more inventory than others, allowing them to be more competitive in pricing.
On the other hand, certain popular car models have waiting lists, meaning buyers are bound to see a price increase when they can eventually complete their purchase.
“The reality is that the new cars that are being built in North America in the next days and weeks are going to be more expensive when they hit the market,” said Mr. Bernard.
He added that the finer details on how a car is assembled are constantly in flux. An automaker could plausibly shift its production process so that more of the content, labour and assembly comes from outside the U.S., and therefore limit its tariff exposure. It could also ship American-made vehicles to other markets and opt to bring vehicles from other production plants to Canada instead.
Mr. Bernard said the vast majority of vehicles manufactured in Canada are shipped to the U.S., and it’s possible that some of those units may instead get sold in Canada in the future.
The best chance that consumers have around deciphering this information is to take their specific questions around what models are impacted to their local dealerships, said Mr. Bernard, because they have the most information from the automakers on their pricing and manufacturing plans.
However, Mr. Akyurek said demand will likely shift to used cars and vehicles that aren’t subject to tariffs if they last long enough. That increased demand could create an uptick in used-car prices as consumers clamour for a smaller section of the market.
A further pressure on supply is that tariffs could push auto manufacturers to limit or halt production altogether, something that Stellantis has already done in Windsor, Ont.
It’s a somewhat similar situation to the pandemic, when supply-chain shortages led buyers to the used-car market. The average price of a used car on Autotrader went up by 21 per cent throughout 2021, from $27,000 in January to $33,000 in December.
Today, the average price of a car remains elevated at nearly $37,000 in March, 2025, and the used market will not likely see the same level of demand as during the pandemic. The good news in that equation, according to Mr. Akyurek, is used car prices are not likely to face such a steep increase.