Prime Minister Mark Carney has announced a comprehensive plan aimed at revitalizing Canada’s automotive industry while facilitating the transition to electric vehicles (EVs). This initiative comes as the sector grapples with challenges posed by a 25% tariff on Canadian cars and parts, imposed by the United States under former President Donald Trump. The new measures reflect Canada’s ongoing efforts to reduce its economic dependence on the U.S. market.
The announcement was made during an event at a car manufacturing plant in Toronto on Thursday. Carney’s strategy includes introducing financial incentives for automakers to invest in Canada, as well as reinstating rebates for consumers purchasing electric vehicles. This is a significant pivot, given that approximately 90% of Canadian-made vehicles are exported to the U.S., and many American car companies maintain operations in Canada due to a long-standing free trade agreement.
The United States-Canada-Mexico Agreement (USMCA), which is due for review this year, was initially designed to eliminate tariffs throughout North America. However, Carney noted that the current U.S. administration’s objectives have shifted, complicating the landscape for Canadian manufacturers. “Their approach has changed,” he stated, emphasizing the need for Canada to prepare for various scenarios.
The impact of these tariffs has been severe, with thousands of Canadian automotive workers facing layoffs as major car manufacturers like General Motors and Stellantis reduce their production capacities in Canada. To counteract the financial strain caused by these tariffs, the new tariff scheme will offer credits to companies producing vehicles within Canada, aimed at mitigating the costs incurred from U.S. tariffs.
As Canadian officials navigate the uncertainties of their trading relationship with the U.S., they have sought to strengthen ties with other countries. Following a recent deal with China, Canada is set to ease tariffs on Chinese electric vehicles, which were introduced in conjunction with U.S. measures in 2024. Additionally, a new agreement with South Korea aims to boost Korean car manufacturing in Canada, potentially providing further competition to U.S. firms.
In a notable shift, Carney announced the reintroduction of incentives for EV buyers, contrasting with the U.S. policy changes under Trump, who eliminated a government subsidy that previously made certain electric vehicles more affordable. In conjunction with these incentives, Canada will implement stricter emissions standards, targeting a future where EVs compose 90% of all car sales by 2040.
Despite these developments, Carney has decided to retract an EV sales mandate established by former Prime Minister Justin Trudeau in 2023. This earlier policy faced considerable backlash from automakers, who argued that it imposed excessive financial burdens. Carney justified the shift to tougher emissions standards as a balanced approach that prioritizes meaningful results for Canadians without overburdening the automotive industry.
Environmental groups have voiced their opposition to the abandonment of the sales mandate championed by Trudeau, underscoring the ongoing debate over Canada’s automotive future. As the country seeks to redefine its position in the global auto market, the effectiveness of these new policies remains to be seen.
