Prime Minister Mark Carney's government plans to overhaul its tariff system to create a stronger financial incentive for automakers to invest in Canada — resisting U.S. efforts to lure factory jobs away. The government is keeping the counter-tariffs it imposed on U.S.-made cars and trucks last year as retaliation for Donald Trump's own levies. But it is launching consultations on a new "import credit" scheme that would help auto companies lower their tariff bill.
Companies that still make vehicles in Canada, such as Toyota and General Motors, would be able to earn those credits based on their production. They could use them to wipe out tariffs on the U.S.-made products they import into Canada — or sell them to other car companies that want to import vehicles for sale. The proposed new tariff system is part of a batch of reforms Carney announced on February 5 to bolster an automotive sector that was already under pressure before Trump arrived with a tariff policy aimed at reducing U.S. automotive imports.
Most of Canada's production is shipped to the U.S. — vehicles and auto parts are among its largest exports. Canada also imports large volumes of cars and trucks from its southern neighbor, the result of an integrated supply chain that has evolved over decades, which Trump is now trying to upend. "Our objective is to remove all tariffs in the auto sector to build the strongest North American auto sector," Carney said at a car parts plant in the Toronto region.
From a supply chain perspective, this reform package reflects a repositioning of the integrated production model in the North American automotive ecosystem (the USMCA framework). For OEMs including Stellantis, Ford and Honda, this "import credit" mechanism is a critical incentive for preserving production investments in Ontario and Quebec. In the medium term, however, production capacity allocation, supplier parts flows and cross-border logistics networks will need to be fundamentally redesigned.
