Can Canada just build its own cars? Experts say no — here's why, and what we could do instead

CBC

13-02-2025

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U.S. President Donald Trump's threats of tariffs on Canadian products and his imposition of tariffs on imported steel and aluminum have triggered alarm in the Canadian auto sector, with experts warning of possible work stoppages and supply chain disruptions.
But experts say building cars in Canada for the Canadian market isn't the answer — instead, Canada could look outside the "north-south" corridor in the face of tariffs.
Canada has a strong and thriving manufacturing sector with five global auto manufacturers, said Brian Kingston, the president and CEO of the Canadian Vehicle Manufacturers Association.
"But the whole industry has been designed around this north-south integration," he said.
"If we are entering an era of highly protected domestic markets … that is highly inefficient. It's extremely costly to do because Canada is a relatively small market."
Canadians purchase under two million vehicles each year – about the same number the country assembles, he said.
But the cars assembled in Canada are largely destined for the U.S. market.
Trump wants Canadian-assembled vehicles made in Detroit
Trump has expressed his disdain for those exports, saying he'd rather build the cars in Detroit.
The U.S. president has three times since his Jan. 20 inauguration threatened tariffs that would affect the North American auto industry.
He first promised 25 per cent tariffs on all Canadian goods and a 10 per cent tariff on energy, all of which have been suspended for 30 days while Canada seeks to address U.S. concerns about border security.
Then on Monday, Trump told a Fox News reporter that he would levy a tariff of up to 100 per cent on Canadian-made automobiles, "if [the U.S. doesn't] make a deal with Canada."
That same day, he announced a 25 per cent tariff on imported steel and aluminum to take effect March 12.
But the auto industry has become so integrated over the past 60 years as a result of successive free trade agreements that car components travel across the Canada-U.S. border multiple times before a final vehicle rolls off the assembly line, said Dimitry Anastakis, a professor in the Rotman School of Management at the University of Toronto.
Tariffs preventing the free flow of parts between Canada and the U.S. could lead to work stoppages due to cross-border supply chain disruptions, Kingston has said.
However, building vehicles for the Canadian market in Canada is "a cute idea" but not a sustainable alternative, according to a mechanical and automotive engineering professor at the University of Windsor.
Peter Frise was part of a team that tried to design a Canadian car and said they couldn't get industry to touch it.
Australia unable to sustain domestic auto industry, expert says
"It was absolutely out of the question," said Frise, who founded the National Automotive Research Network in 2000.
"As soon as we talked to industry about it, they started slamming the door as hard as they could on that. … They said that is absolutely impossible. We would never do that. We don't even want to talk about it. …We could never afford to do that."
For example, Australia tried for many years to compete in the auto sector, said Dennis Darby, the president and CEO of Canadian Manufacturers and Exporters.
"It had its own car companies, which were all global car companies that operated in Australia protected by tariffs," Darby said.
"And they eventually gave up, and there's no production at all in Australia because they just couldn't."
It was once common to see branches of American plants in Canada building all kinds of products for the Canadian market, but technology has evolved, Darby said, and auto makers have consolidated.
"It's just not practical to build a car company from scratch," Darby said. "The last person to do that was Elon Musk, and he had billions of dollars of capital."
These days Canada is home to massive parts manufacturers such as Magna International, which produce products for the global supply chain.
Canada needs to look for new markets, expert says
The best course of action for Canada, he said, is to look at ways to grow the market for those products outside the U.S.
"What we have not done as Canadians is build really good east-west corridors," he said.
"We have these free trade agreements with Asia, and we have free trade agreements with Europe. And … we have not taken advantage of those."
Frise said Americans will also find themselves struggling as a result of the tariffs and tariff threats.
About 90 per cent of the aluminum used in the auto industry comes from Quebec, he said.
"They can't realistically replace it," Frise said.