Sales of vehicles built in the United States fell sharply in Canada during the first half of 2026, extending damage from the cross-border tariff war that has forced automakers to reroute production away from American plants.
US-built vehicles accounted for 28.4% of Canadian new-vehicle sales in the first six months of the year, down from 35.4% in the same period of 2025, according to data from JD Power Canada cited by Automotive News.
American-made vehicles had held about 40% of the Canadian market from 2021 through the first quarter of 2025, according to JD Power.
Robert Karwel, Director of OEM Solutions at JD Power Canada, told Automotive News that sales of US-built vehicles had been “steamrolled” over the past 18 months — not because Canadian buyers stopped wanting them, but because automakers are redirecting production to dodge the duties.
The decline stems from a tariff cycle that began in April 2025, when President Donald Trump imposed 25% duties on imported vehicles. Vehicles that comply with the Canada-United States-Mexico Agreement (CUSMA) pay only on their non-US content.
Ottawa responded with matching levies on US-made imports. Washington has since escalated further, threatening to raise auto tariffs to 50% from January 2027.
$5.6 Billion in Losses
Brian Kingston, President and Chief Executive Officer of the Canadian Vehicle Manufacturers’ Association (CVMA), which represents the Detroit Three in Canada, told Automotive News the damage from US tariff policy is now quantifiable across every major indicator.
“By virtually every metric — be it jobs, production, prices, tariff costs — every metric points to the same thing: US trade policy is damaging the US auto industry,” Kingston said, according to Automotive News.
The White House said in July that Canadian imports of US-built vehicles fell about 22%, or $5.6 billion, between April 2025 and March 2026. It cited the drop as grounds for new tariffs on Canadian goods.
Lucas Malinowski, Chief Executive Officer of Global Automakers of Canada, told CBC in August that tariffs and trade disruptions had added $110 billion in costs to the North American auto industry over the past 18 months.
Flavio Volpe, President of the Automotive Parts Manufacturers’ Association, has argued that because the importer of record pays the duty, US assemblers absorb much of the cost of tariffs on Canadian parts.
Mexico and Japan Fill the Gap
As US market share in Canada has eroded, vehicles from Mexico and Japan have gained ground.
Mexican-built vehicles captured 22.2% of Canadian sales in the first half of 2026, up from 18.3% a year earlier and 13.7% five years ago, according to JD Power data.
Mexico’s low-cost assembly base and its continued duty-free access to Canada under CUSMA make the country a natural beneficiary.
Karwel told Automotive News that if US tariffs remain in place, Mexico could rival the United States as the top source of vehicles entering Canada as soon as next year.
BMO Capital Markets flagged the same dynamic in a note published last week.
Chief Economist Douglas Porter wrote that Canada produced 1.2 million vehicles over the past 12 months compared with 3.9 million in Mexico, while selling more than 1.9 million against Mexico’s about 1.6 million — making Canada a large net importer and Mexico a major net exporter.
Mexico and the United States hold their next formal negotiating round September 28 and 29 in Washington. A deal that preserves Mexican access to the US market would reinforce that advantage.
Japanese imports also rose considerably.
Japan accounted for 16.6% of Canadian sales in the first half of 2026, up from 13.7% a year earlier.
Subaru has shifted nearly all its Canadian-market production to Japan from the United States, Automotive News reported, while Hyundai has leaned on operations in Mexico and South Korea.
South Korean-built vehicles held 15.6% of the Canadian market, up one percentage point, while European imports remained flat.
Tariff Remission Splits the Market
Despite a wave of buy-Canadian sentiment, sales of Canadian-built vehicles actually declined to 11.5% in the first half, down from 12.6% a year earlier.
According to Karwel, model changeovers and slower plant output likely contributed, alongside effects from Canada’s tariff-remission program.
Under that framework, automakers with assembly plants in Canada — Ford, General Motors, Honda, Stellantis and Toyota — receive breaks on import duties in exchange for maintaining domestic production.
Ottawa cut GM’s tariff-free quota by 24.2% and Stellantis’ by 50% in October 2025 after both scaled back Canadian production. It raised one automaker’s quota in March.
For those five companies, US-built sales remained relatively resilient at 45.2% of their Canadian totals in the first half of 2026, down 3.1 percentage points from 2025.
Automakers without Canadian plants had no such cushion. US-made vehicle sales for that group collapsed to 4.9% of their Canadian sales, down from 17.7% a year earlier — a decline Karwel described as falling “off a cliff.”
No Resolution in Sight
Trade talks between Ottawa and Washington broke down in August.
Canada walked away from a US offer that would have lowered the headline vehicle tariff to 15% but excluded medium- and heavy-duty trucks.
Prime Minister Mark Carney said Washington “asked too much and offered too little.”
Malinowski told Automotive News the production shifts are likely reversible if Washington changes course, but automakers will need assurances that any agreement is permanent.
Kingston said the Detroit Three are pushing for a resolution on both sides of the border.
“This is a self-defeating policy that ultimately is going to damage the competitiveness of the sector across North America,” the CVMA chief stated. “It underlines why we need to get back to the negotiating table and resolve the situation.”
Canada’s auto manufacturing sector directly employs about 105,000 to 125,000 workers, with the wider industry supporting more than 500,000 jobs nationally.
More than 90% of Canadian-assembled vehicles are exported to the United States — a flow that BMO has warned faces structural erosion unless tariffs are eased or Canada’s auto strategy is fundamentally rethought.
