US President Donald Trump on Monday threatened to raise US tariffs on all cars, lorries and automotive parts from Canada to 50 per cent starting on January 1, intensifying a trade fight after negotiations collapsed last week.
The trade deal would have cut the top-line tariff rate on Canadian cars and light-duty lorries from 25 per cent to 15 per cent, and the tariffs on aluminium and steel from 50 per cent to 25 per cent.
But the deal fell apart on Friday over a number of points of contention, including whether the US tariff relief would have applied to medium or heavy-duty trucks.
The escalation threatens to disrupt one of the world's most integrated car supply chains. US vehicle production is heavily reliant on Canadian-made parts and vehicles, and higher tariffs could raise costs for American car makers and consumers while deepening a trade stand-off that has already hit auto stocks.
"Build in the US and there are zero tariffs. Canada will be treated like a state no longer," Mr Trump wrote in a social media post.
"On trade, and in other ways also, they are among the worst nations in the world to deal with. They feel entitled, and yet, we don't need Canada, they need us."
But it is unclear if the new tariffs will be enacted.
The January 1 introduction leaves room for potential negotiations, even as the Canadians see little chance of them resuming before the midterm elections in November.
Canadian Prime Minister Mark Carney is set to respond to the weekend tariffs with levies of his own on September 8 and the US has threatened to escalate further if he does.
At a media conference in Quebec on Monday, Mr Carney said a "mutually beneficial deal" with the US was possible, but only if the Americans respect Canada's sovereignty.
"When the Americans go to the negotiating table first with the right attitude toward our industry and a true partnership, of course we'll come to the negotiating table," he said at a briefing announcing an investment in six new Canadian icebreaker ships.
Shares in car makers fell. Ford and Stellantis stocks were down 3.6 per cent and 4.2 per cent respectively, while shares of General Motors were down 1.6 per cent on Monday afternoon. Toyota stock was down 1.5 per cent in New York trading and Honda shares were down 2.1 per cent.
"A threatened US tariff on Canadian auto parts will be paid by [the] US auto assembly. Without those specific parts, auto assembly throughout the US would halt," said Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association.
