Elected officials and Detroit automakers have fretted for years that low-priced, high-quality Chinese cars could eventually enter the US market through Mexico. But consider this:
Car haulers full of Chinese-brand vehicles might someday roll across the Ambassador Bridge and the soon-to-open Gordie Howe Bridge in Detroit, from Canada.
That isn’t likely to happen any time soon. Former President Joseph Biden last year slapped on Chinese electric vehicles a 100% tariff that President Donald Trump has continued. Canada also has in place a 100% tariff on Chinese EVs.
But Canada is rumored to be considering removing that tariff as part of a broader effort to build trade relationships with China and other Asian countries in response to Trump’s foolish trade war against our formerly friendly northern neighbor.
Both Trump and Canadian Prime Minister Mark Carney were in Asia at the same time recently seeking investments.
Relations between the two countries, already testy, further deteriorated after Ontario produced a US-aimed television ad featuring former President Ronald Regan extolling the virtues of free trade.
The ad ran briefly during the World Series, in which many Americans were rooting for the Toronto Blue Jays to defeat the Los Angeles Dodgers.
Trump was so incensed by the ad that he called off trade negotiations with Canada and said he was slapping an additional 10% tariff on Canadian-made goods coming into the US. Trump attacked the ad as “fake” and said in another one of his down-is-up moments that Ronald Reagan “loved tariffs.”
Canada is heavily dependent on trade with the US so it’s not surprising Carney is seeking new partners if America no longer wants to play ball.
But Michigan’s economy could be a big loser if Canada succeeds in spurning the state for new trading relationships with Asian countries.
Canada is Michigan’s largest trading partner. The state exports more goods, worth in excess of $23 billion a year, to Canada than any other country.
A recent statewide poll conducted for the Detroit Regional Chamber found that nearly 60% of Michigan voters think putting tariffs on Canadian goods is bad for the state’s economy.
“They believe tariffs are increasing their costs, hurting the state’s auto industry – and that placing tariffs on Canada hurts Michigan,” said pollster Rich Czuba, who conducted the survey.
Already, goods-carrying truck traffic on the Ambassador Bridge, the busiest US-Canada crossing, is down by more than a third so far this year from 2024. Truck traffic on the Bluewater Bridge at Port Huron is off by 6.7%.
Retailers and other businesses in the state’s border communities of Detroit, Port Huron and Sault Ste. Marie say they are seeing fewer Canadian customers, who appear to be boycotting US shopping and entertainment venues.
Trump doesn’t seem to care. He has often said that the US doesn’t “need anything” from Canada, including the 1.8 million cars and trucks Canada annually exports to the US. Many of those vehicles are built in plants owned by General Motors, Ford Motor and Stellantis.
The president wants those Detroit automakers to close their Canadian plants and move production to the US, part of his plan to cripple the Canadian economy and make it the 51st US state. Canadian leaders bluntly say that will never happen.
Detroit automakers appear to be responding to political pressure by Trump.
GM and Stellantis recently slashed production of several models in Canada, prompting the Canadian government to limit the number of vehicles the two automakers can ship to our northern neighbor tariff free.
That move adds to worries by Detroit automakers that the USMCA free trade agreement, which Trump negotiated in his first term and which has mightily benefited Detroit, might not survive. The agreement comes up for review next year and prospects for extending it are unclear.
Maintaining the USMCA “can create an even stronger North American trading bloc, ready to compete with China at every turn,” said Glenn Stevens, executive director of MichAuto, which promotes Michigan’s auto industry.
But Canada, facing the potential loss of significant Detroit Three investment, is looking to partner with China to possibly replace it and more than 100,000 direct auto jobs, which that investment supports.
Removing the 100% tariff could also allow China, which has massive production overcapacity at home, to export vehicles to Canada before establishing production there.
If Canada drops its tariff on Chinese cars, it could gain a significant advantage over the US and Mexico in giving China an opening to the North American market. Mexico, long seen as the most logical entry point for Chinese cars, is planning to raise its tariffs on Chinese vehicles from 20% to 50%.
Experts and even many auto industry executives say that it’s just a matter of time before American consumers are able to buy Chinese vehicles – particularly EVs, which China dominates. And a study released earlier this year by AutoPacific Inc. found that nearly 60% of car-buying Americans under 40 would seriously consider Chinese vehicles.
Trump’s trade war might result in the unintended consequence of those vehicles entering our market through Canada – an existential threat to tariff-weary Detroit automakers.
This story was originally produced by Michigan Advance, which is part of States Newsroom, a nonprofit news network which includes Louisiana Illuminator, and is supported by grants and a coalition of donors as a 501c(3) public charity. The article is republished under a Creative Commons license.
