Auto factories could ‘shut down in ten days’ as Canadian industry hit by sweeping U.S. tariffs

Ontario premier Doug Ford warned sweeping U.S. tariffs could shutter car factories on both sides of the border in 10 days, threatening tens of thousands of jobs in Canada’s $65 billion automotive sector and imperiling the country's ambitious EV strategy.

The across-the-board 25 per cent levy on Canadian exports, and a 10 per cent tariff on oil and gas, drew widespread condemnation from the business community and pummeled stocks on both countries’ financial markets.  

The most seismic impacts would be felt in Ontario, the heartland of Canada’s auto industry, along with factories in neighbouring U.S. states, such as Michigan, Ford said. 

"Assembly lines in the auto sector will shut down within ten days, I predict, because of the trade we do back and forth," Ford told reporters after the tariffs took effect at midnight, underlining that auto parts crossed the Canada-U.S. border up to eight times before final assembly, with each transaction now incurring a tariff. 

“I'm almost positive that assembly plants will shut down on both sides of the border," said Ford, who won re-election after a campaign focused on U.S. President Donald Trump’s tariffs and threats to annex Canada.

The U.S. tariffs could "unwind decades of integration" between the Canadian and U.S. automotive supply chains, said Brian Kingston, CEO of the Canadian Vehicle Manufacturers' Association, an industry body, adding the damage to the auto industry would have serious economic consequences for Canada, Mexico and the United States.

A ray of hope appeared on Tuesday afternoon, however, with Commerce Secretary Howard Lutnick appearing on Fox News to suggest that Trump is considering backing down.

“I think he’s gonna figure out, ‘You do more, and I’ll meet you in the middle someway,’ and we’re going to probably be announcing that tomorrow," Lutnick said.

Will EV plans stall?

The trade war comes at a critical time for Canada’s emerging electric vehicle (EV) supply chain as it tries to put down roots in Ontario. Global auto giants and battery-makers have pledged $46.1 billion in investments since 2021, with federal and provincial governments contributing $52.5 billion through subsidies and tax credits.

Ottawa's $100 billion strategy has already suffered setbacks as automakers postponed or shelved projects in response to slowing domestic EV demand and battery makers were confronted with lower prices and tighter margins in a competitive global market dominated by Chinese rivals.

Japanese automaker Honda and Volkswagen-owned battery maker PowerCo — two EV giants and key players in Canada’s strategy — now appear to be hedging their bets. 

Honda Canada, which has pledged $15 billion for four plants, including an EV factory in Alliston, Ont., said it needed time to assess the tariff impacts.

“We will take no immediate actions related to either our current manufacturing operations or future electrification plans in Canada,” Ken Chiu, spokesman for Honda Canada, told Canada’s National Observer.

Honda was focused on “protecting” its 4,000-plus employees in Ontario and wider business operations in the country, he said.

"Our path is for the long term and with our North American powertrain production flexibility, we are confident we can pivot effectively," Chiu added.

PowerCo is set to make batteries for up to one million cars in Volkswagen's St. Thomas, Ont. EV plant. Its spokesperson told Canada’s National Observer it was "still too soon to speculate on the impact of the newly announced tariffs" on its production plans.

Trump sent out a provocative message on Truth Social, his social media platform, to companies seeking to escape the U.S.’s punishing levies. “If companies move to the United States, there are no tariffs!” he said in a post. 

But Lana Payne, president of UNIFOR, Canada's largest union representing 320,000 workers, including tens of thousands of autoworkers, cautioned strongly against automotive supply chain companies considering moving their operations down to the States.

“My message to the corporations that we deal with as a union is: if you think that shifting production is the solution here, you are going to have a massive fight on your hands,” she said in an interview on CTV News.  

She said the auto industry has seen five years of unprecedented investments “only to be faced with this."

Matthew Fortier, CEO of Accelerate ZEV, a sector advocacy body, said now was not the time to retreat from Canada’s EV supply chain plans.

"We have to take back some control," Fortier told Canada's National Observer. 

“That means re-industrializing, fast-tracking priority critical mineral and materials projects, incentivizing manufacturers to stay the course with Canada, and demonstrating to the world that we can be decisive and efficient,” he added. 

Cleantech sector vulnerable

Though the automotive and EV sectors received most of the attention on day one of the trade war, the tariff impacts also resonated throughout Canada’s cleantech industry.

With 77 per cent of the sector's exports currently destined for the U.S., Canada’s cleantech ecosystem is particularly vulnerable to the tariff pressure, said Lynn Côté, executive director of the Canadian Cleantech Alliance, an industry body. 

"Many of Canada’s cleantech companies — which generally run very lean, financially —  are in early commercialization mode,” Côté said, noting that being in this early stage in development left them exposed at a time when Trump policies are slowing the U.S. energy transition.

Côté told Canada's National Observer that the sector could try to pivot to new markets but will need government support during this transition. “The opportunity exists for Canada to fill this void as we diversify our sales away from the U.S. and form deeper partnerships abroad,” she said.

Toronto-based renewables developer SolarBank develops small-scale solar farms across North America and recently announced a move into renewables-powered mid-scale data centres. CEO Richard Lu said the tariffs created uncertainty in both countries’ energy transitions, but he saw both risks and opportunities in the months ahead.

“Boiling it down – clean energy growth will continue in the face of uncertainty," Lu told Canada's National Observer.

United effort to ‘get things built’

The U.S. tariffs could fuel a drive to "get things built across all sectors of our economy,” said Merren Smith, CEO of the New Economy Canada, a think tank. Top of mind in government and industry, she said, should be critical mineral mines, clean energy projects, electricity transmission infrastructure and high-value manufacturing plants. 

"Doubling down on attracting and deploying investments in projects that will help achieve economic and energy security will make Canada more resilient and competitive,” Smith said in calling for a united effort by industries, small businesses and workers to “navigate these uncertain times.” 

UNIFOR's Payne was more blunt: “Canada has no choice but to fight this trade war with everything we have.”

Investors taking a wait-and-see approach since Trump first threatened to impose the heavy tariffs late last year pushed shares lower in both countries’ financial markets. Toronto's main index ended down 1.7 per cent, its biggest loss since December 18, while U.S. stock indices also ended as much as 1.5 per cent lower.

(Additional reporting by Abdul Matin Sarfraz)