The Canadian Trucking Alliance says yesterday’s executive order by President Trump is a contravention of the Canada-United States-Mexico Agreement (CUSMA) which will devastate many Canadian trucking companies.
The Executive Order, entitled Adjusting Imports of Automobiles and Automobile parts into the United States, states President Trump ordered an investigation in his first term, which concluded that automobiles and certain automobile parts are being imported into the United States in quantities’ and under such circumstances that threaten to impair the national security of the United States.
In 2019, the United States engaged in discussions with the European Union (EU) and Japan to resolve this matter but were subsequently left unresolved in the opinion of President Trump.
The 2025 Executive Order states:
“The Secretary has informed me that, since the February 17, 2019, report, the national security concerns remain and have escalated. The COVID-19 pandemic exposed critical vulnerabilities and choke points in global supply chains, undermining our ability to maintain a resilient domestic industrial base. In recent years, American-owned automotive manufacturers have experienced numerous supply chain challenges, including material and parts input shortages, labor shortages and strikes, and electrical-component shortages. Meanwhile, foreign automotive industries, propelled by unfair subsidies and aggressive industrial policies, have grown substantially. Today, only about half of the vehicles sold in the United States are manufactured domestically…, the number of employees in the domestic automotive industry has also not improved since the February 17, 2019, report… the United States-Mexico-Canada Agreement (USMCA), have not yielded sufficient positive outcomes.
Based on the above, the president has set an April 3 deadline for automobiles and a May 3 deadline for automobile parts. These deadlines come with provisos as outlined below:
Except as otherwise provided in this proclamation, all imports of articles specified in Annex I to this proclamation or in any subsequent annex to this proclamation, as set out in a subsequent notice in the Federal Register, shall be subject to a 25 percent tariff with respect to goods entered for consumption or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on April 3, 2025, for automobiles, and on the date specified in the Federal Register for automobile parts, but no later than May 3, 2025, and shall continue in effect, unless such actions are expressly reduced, modified, or terminated. The above ad valorem tariff is in addition to any other duties, fees, exactions, and charges applicable to such imported automobiles and certain automobile parts articles…For automobiles that qualify for preferential tariff treatment under the USMCA, importers of such automobiles may submit documentation to the Secretary identifying the amount of U.S. content in each model imported into the United States. “U.S. content” refers to the value of the automobile attributable to parts wholly obtained, produced entirely, or substantially transformed in the United States. Thereafter, the Secretary may approve imports of such automobiles to be eligible to apply the ad valorem tariff of 25 percent in clause (1) of this proclamation exclusively to the value of the non-U.S. content of the automobile. The non-U.S. content of the automobile shall be calculated by subtracting the value of the U.S. content in an automobile from the total value of the automobile.
The Executive Order also stated that the Secretary of Commerce can inform the President of any circumstance that, in the Secretary’s opinion, might indicate that the increase in duty rate provided for in this proclamation is no longer necessary. In a recent Fortune Article, Secretary Lutnik is reported to not be a strident supporter of tariffs.
About 75 percent of the $82 billion CAD import market and 50 percent of the $79 billion CAD export market moves by truck.
Heavy duty trucking product was not impacted by yesterday’s Executive Order. CTA is meeting with its Board next week to discuss the impact of the tariffs on the cost of trucking equipment and the direction the Alliance will provide to the Department of Finance in Canada in their consultation process regarding the impacts of the application of tariffs to goods.
However, the application of tariffs on the Canadian auto sector would seem to be a direct breach of CUSMA. Known in the trade community as The Canada-U.S. 232 Autos side letter, this document guarantees an exemption from Section 232 measures for 2.6 million Canadian automobiles annually.
“The Canadian auto sector, including vehicles and auto parts, moves by truck. The application of tariffs on the North American auto sector would be a blatant breach of CUSMA and will have a devasting impact on Canadian trucking fleets, some of which are exclusively dedicated to serving their US-Canadian customers in the auto sector,” says CTA president Stephen Laskowski. “These trucking companies will face decisions about whether to continue operating, reduce their fleet size or attempt to enter a flooded domestic market already facing an over capacity and underground economy crisis.”
Despite yesterday’s announcement and Executive Order, questions abound in trade circles regarding what level and to whom these tariffs will be applied. There is also the thought the application of tariffs will be subject to standing in trade dispute processes which the U.S. is party to — Section 232 Investigations or Section 301 of the Trade Act (1974).
CTA and its members will continue to work with all levels of government to support the appropriate response to these tariffs as well as provide governments with input to domestic actions required to make our sector more competitive, efficient and resilient during this economic crisis.