1 week Ago By David Booth
Article content Barely a week after doing his best impression of Don Corleone, it is Donald Trump who has had to make a concession he couldn’t avoid. The tariffs he claimed were so “beautiful” have been paused and, if the last week is any indication, seem unlikely to return, at least as fulsome and universal as those he tried levying on “Liberation Day.” Ironically, the cause of his plan’s demise caught many by surprise.
Most thought the roadblock would come from Wall Street when stocks crashed. Still others posited we’d have to wait until Main Street — that’s the polite way of saying “MAGA supporters” — got hit with the inevitable runaway inflation. Both were wrong.
Instead, his Waterloo came from a completely unexpected source: the bond market. I’m going to do my best not to turn this into a dime-store lesson in economics, but bonds usually act in contradiction with equity fluctuations (thus why we’re always admonished to diversify). They are the refuge that investors seek when the Dow Jones is tanking.
Instead — and this really did surprise everyone, not just me — the entire world of normally staid bank investors gave America the middle finger and dumped bonds. By shunning their normal “safe haven,” bond traders sent yields spiralling. As to why this, amongst all his other problems, would have caused The Donald to capitulate, that’s easy.
The American president may not, as is becoming ever more obvious, understand tariffs, or even general economics, but he has been bankrupted three times by excessive debt. In other words, servicing America’s US$36.2-trillion debt at rapidly increasing interest rates is a problem he could understand.
The money men figured out how to hit him where it really hurts; hence why we now have 90 days of purported calm. That’s not to say everything’s rosy. Despite the fact it was Trump who called for the cease-fire, the tariffs still in place — 25% on some automobiles — and the uncertainty his weekly policy shifts create, the auto industry still faces other equally existential problems.
Motor Mouth has identified three that might be the most troublesome. Ford of Canada on the bubble Of all the automakers Trump is trying to “protect,” Ford’s position would seem the most precarious. At the very least, it is the domestic manufacturer most likely to suffer from the reciprocal tariffs that still cover automotive movement across the Canada-America border.
To wit— One of the policies likely to be instituted to lessen the impact of these reciprocal tariffs is remission. No, we’re not talking about the diminution of a deadly disease like, say, cancer — though considering Trump’s machinations of late, that might be an apt metaphor — but rather its definition in economics, namely the “cancellation of a debt, charge, or penalty.” In terms of our trade war, it’s actually quite an easy concept to grasp.
The Canadian government very much wants those automakers producing cars here in Ontario to stay despite Trump’s imposition of tariffs. The best way to do that it to mitigate the damage tariffs might cause. And the best way to do that is to basically ‘remit’ all the money automakers have to pay to import an American-built car into Canada back to them .
These remissions can come in different guises. They can be allotted on a per-unit basis (i.e.
one credit per vehicle imported) or on a value basis (in this case, the total value of the cars imported). In either case, the importer is allowed to import as many cars — or total value of vehicles — as it produces here in Canada. In simpler terms, Toyota Canada, for instance, could import without penalty as many Texas-built Tundras and Kentucky-made Camrys into Canada as it produces RAV4s in Woodstock and Lexus RX350s in Cambridge.
The point is to make the tariffs revenue-neutral for anyone manufacturing automobiles in Canada. The same would apply to Stellantis, Honda, and General Motors, all of whom build cars in this great nation of ours. Ford, however, doesn’t.
Oh, it has a plant in Oakville, Ontario, but it’s been shuttered for a while. That pause was initially explained as a temporary measure, as Ford transitioned to building some unnamed electric vehicle. Then the bottom dropped out of the EV market, and the closure has started to look a lot less fleeting .
Whatever the situation, Ford builds no cars in Canada at the moment, which means it would not be eligible for remission recovery, and would have to pay whatever might be the full tariff that applies to vehicles imported from the United States. That includes the 130,000 or so (very profitable) F-Series pickups the company no doubt hoped to import this year. The good news, at least for now, is that the company’s Maverick , Mustang Mach-E , and Bronco Sport are all built in Mexico, and therefore can be imported into Canada without tariffs under current USMCA “shipping in bond” rules.
Essentially, any tariff paid at the Mexican border as such a car was “imported” into the United States would be refunded as it exited the U.S. at the Canadian border.
The problem is that, if the president remains true to recent form, this loophole would probably get shut down in his quest to return all vehicle assembly to the U.S. That would seem to leave Ford choosing between re-opening Oakville and saving its Canadian business; or simply paying tariffs on everything it imports into Canada.
The first would definitely anger Donald Trump, while the second would almost assuredly surrender market share to its two closest competitors, General Motors and Toyota. Of all the automakers selling cars on either side of the 49th parallel, Ford’s position would seem the most uncertain. Tesla in for a world of hurt There’s a reason Elon Musk recently called Trump trade-whisperer Peter Navarro a “moron” : tariffs are killing his business.
Indeed, one of the ultimate ironies of the Trump-Musk bromance is that it is Tesla that is suffering most from tariffs amongst American automakers. Teslas built in the U.S.
are, of course, tariffed if they are sent here. But then so, too, are any Model Ys built in China, since Canada now also imposes tariffs on EVs built in Shanghai , all at the request of — cue that irony alert — his new best friend, Donald Trump. Meanwhile, virtually every province save Quebec has revoked their ZEV subsidies of Teslas, which means that not only do Musk’s cars face a tariff at our border, most consumers shopping at its dealerships no longer qualify for a rebate.
What really renders Trump’s machinations a paradox, however, is that Tesla is also the leading example of the type of car company he purports to promote with his trade actions. Trump’s ambition for his tariffs is reducing America’s trade imbalance; he wants the world to buy more of what the United States produces. The problem — at least as it relates to the auto industry — is that the lack of exports has little to do with tariffs imposed by other countries.
As Motor Mouth explained last week, the reason Ford can’t sell an F-150 in Milan, or Stellantis a Ram pickup in Tokyo, is not a result of tariffs, but the vehicles’ unsuitability for export markets . Few — that could easily be read “none” — of the cars produced by the Big Three in the United States are truly viable elsewhere. Save for the Cybertruck, Tesla is the one exception.
All the cars it sells worldwide — and its Model Y was famously the best-selling car on the planet last year — are identical to what it peddles (save regulatory changes) in the United States. In effect, The Donald is punishing his new best friend, Elon, for doing exactly what he wants the entire industry to do. I’m pretty sure that’s the very definition of irony.
Carney can save or tank Canada’s auto industry Lost in all the recent hyperventilation about Trump’s trade war are the issues the Canadian auto industry already faces: we introduced a national ZEV mandate just as resistance to expensive EVs grew stronger; there’s now a 100% tariff on the cheap Chinese electric vehicles that might make meeting that mandate more plausible; and we have a new prime minister whose concerns over climate change are at least as strong as his predecessor’s. Just a couple of the questions facing Liberal leader Carney: do I retain Justin Trudeau’s ambitious plans to have all cars sold in Canada be plug-ins by 2035, when consumers and manufacturers alike are signalling they’re not ready? Do I remove that prohibition on Chinese electric vehicles so we might easily hit those numbers more easily? More importantly, if I do have to step in and bail out the auto industry, do I attach a whole bunch of emissions-reduction and EV-production riders that might do as much damage as the tariffs themselves? For those constantly questioning our government’s grasp of the task at hand, understand there are no easy answers. Keep the EV mandate and numerous legacy automakers — including those still building cars in Canada — are going to get penalized for not hitting their quota.
Eliminate the ZEV mandate, and the Liberals offend their base. Conversely, while letting cheap Chinese EVs into the country would certainly help him meet his government’s ZEV targets, it would also rile up Trump at a time when the industry desperately needs calm. An invasion by BYD and its ilk would also hurt the Canadian auto industry, again probably just as much as the tariffs any government intervention might attempt to alleviate.
Love or hate Carney all you will, but easy answers to all that challenges our auto industry would seem in dreadfully short supply. Sign up for our newsletter Blind-Spot Monitor and follow our social channels on X , Tiktok and LinkedIn to stay up to date on the latest automotive news, reviews, car culture, and vehicle shopping advice..
