U.S.-Built Cars Fall to 28.4% of Canadian Sales as Tariffs Backfire

Only 28.4% of new vehicles sold in Canada in the first half of 2026 were built in the United States, down from 35.4% in the first half of 2025, according to JD Power Canada data. A decade ago, nearly half of new cars hitting Canadian roads came from American factories. From roughly 2021 to 2025, the U.S. share held steady at about 40%.

Auto analysts attribute the steep decline to a series of import taxes imposed on Canada over the last year and a half. Those measures included a 25% tariff on Canadian-made cars, a levy expected to double and extend to Canadian auto parts, steel, and vehicles on Jan. 1, 2027. Canada responded with retaliatory tariffs on American-made autos, steel, and aluminum.

The timing could hardly be worse for U.S. automakers. Canada is the largest export market for American autos — larger than the next 10 markets combined, according to a Royal Bank of Canada analysis published last month. Auto trade between the two countries has topped $100 billion this year, and Canada remains America's largest auto market despite the friction.

"The data is irrefutable," Brian Kingston, CEO of the Canadian Vehicle Manufacturers' Association, which represents America's major automakers in Canada, told Automotive News Canada. "By virtually every metric—be it jobs, production, prices, tariff costs—every metric points to the same thing: U.S. trade policy is damaging the U.S. auto industry."

How tariffs have roiled the U.S. auto industry

The industry's core problem is structural. No vehicle is built in just one country. Cars require thousands of components assembled across facilities worldwide, meaning U.S. automakers still depend on foreign inputs even for American-badged models.

GM and Stellantis have reported billions of dollars in tariff losses. Those costs are reaching consumers: Kelley Blue Book estimated tariffs would push car prices up by as much as $6,000, which in turn raises auto taxes, financing, and insurance costs.

When President Donald Trump implemented the first auto tariffs in April 2025, economists warned the restrictions could actually reduce U.S. vehicle production, since many "American-made" cars are assembled in Canada or Mexico before final finishing in the U.S. That forecast may already be materializing. The U.S. has about 75,000 fewer manufacturing jobs since January 2025, including 25,900 fewer in motor vehicles and parts production.

Some reshoring could offset the losses long term. Toyota has announced a $3.6 billion expansion adding 2,000 jobs at its San Antonio plant, and Ford plans to move some Lincoln production from China to the U.S. in 2030.

Meanwhile, the market share U.S. automakers are losing in Canada is going to competitors in Asia and Europe, where integrated supply chains make production cheaper and tariffs on imports into Canada are lower, Kingston told Fortune. Canadian imports from Japan rose from 13.7% in the first six months of 2025 to 16.6% in the same period this year, per JD Power data. South Korean imports gained a percentage point to 15.6%. European imports plateaued.

"We're in this odd situation where it is now more cost-effective to build a car in Japan or Germany, South Korea, Mexico, and bring it into North America than to build here in North America because of all of the mounting tariff costs," Kingston said. "That does not bode well for the future of North America's automotive industry."

The future of U.S.-Canadian trade

The stakes extend beyond the current sales cycle. The U.S. and Canada have built their auto trade relationship over six decades, starting with a 1965 pact that eliminated some import taxes and consolidated the industry across borders. NAFTA strengthened those ties in 1994, and the U.S.-Mexico-Canada Agreement fortified them in 2020.

Trump has now declined to renew the USMCA, despite having signed the legislation six years ago. The agreement blunted some tariff impacts by providing carve-outs for auto parts, and its lapse would add supply chain uncertainty. The Tax Foundation estimated removing USMCA exemptions would increase taxes by $466 billion over the next decade — roughly $300 per U.S. household next year — and decrease U.S. output by about 0.1%, the equivalent of 95,000 full-time jobs in lost working hours.

Kingston argued the damage goes beyond short-term economics. It could jeopardize a 60-year-old partnership that sustained industrial synergy across the border.

"You shrink your market when you take protectionist policies, and you make your industries less competitive," Kingston said. "This isn't a winning formula for success, and the longer these tariffs are being in place, the more damage it's done."

With the 25% tariff set to double on Jan. 1, 2027, and the USMCA's future unresolved, U.S. automakers face the prospect of further share losses in the one market that buys more American cars than any other.