TORONTO — Car buyers and autoworkers in Southern Ontario may be among the first to feel the pain of new 25 per cent tariffs imposed by U.S. President Donald Trump—and the impact could be much more widespread.

Auto exporting is a major economic engine for Canada, bringing in about $51 billion in 2023. About 93 per cent of those exports go to the U.S., exposing a major piece of the economy to new 25 per cent tariffs that take effect at 12:01 a.m. ET on Feb. 4.

The tariffs may add thousands of dollars to the costs of American businesses trying to buy Canada’s second-biggest export, the auto industry says. Canada is exposed to shocks to the auto sector because Ontario is the only place in North America where five major automakers manufacture. That requires sending auto parts back and forth across the U.S. border, sometimes multiple times. 

“The value of our individual and collective wealth depends on our ability to sell. We’re under the existential threat on our ability to sell to our biggest trading partner,” said Dennis Darby, CEO of Canadian Manufacturers & Exporters.

That means that even if you aren’t in the market for a car, you may feel the economic impact of tariffs on the sector. The auto industry supports about 100,000 direct jobs and hundreds of thousands of indirect jobs in Ontario alone, where there are 700 parts firms, more than 500 tool, die and mold makers, and hundreds of other automotive software firms. The Unifor multi-sector union has estimated that the Canadian auto industry, which made over 3,300 vehicles per day in 2022, makes an “oversized” contribution to the economy, with autoworkers contributing $6.1 million per day to the tax base.

Brian Kingston, who leads the Canadian Vehicle Manufacturers’ Association, warned that the tariffs will lead to “job losses at manufacturing facilities across the continent,” with immediate negative consequences.

David Adams, CEO of Global Automakers of Canada, whose group members include Honda and Toyota, estimated each job in an auto manufacturing plant supports five to eight other jobs in the Canadian economy. “That ripples throughout the whole community, not only to obviously the parts suppliers, but then to the diner where the workers go for lunch or for beers after work,” he said. 

Beyond that, communities as far apart as Medicine Hat, Alta., and New Glasgow, N.S., are hubs for tire manufacturing, as are many communities in and out of the rust belt that have cropped up as factory towns. 

“It’s not like companies out of charity decided to come to Canada because we had a free trade agreement. This is a good place to build cars, just like Michigan is,” said Darby. 

Darby said tariffs threaten to unwind the strategically placed automotive supply chain built over decades, and doing so would be an “incredible” detriment. Unemployment in Canada could rise as companies potentially move more manufacturing to the U.S., and some are already considering doing so, Darby said. The Canadian dollar may weaken, which would make it cheaper for U.S. companies to manufacture here, but make it more expensive for Canadians to purchase goods from around the world. Canada could try to build new trade routes for its goods directly to Mexico or elsewhere, but that could take months or even years. 

It may be difficult to contain those impacts to the auto sector alone.

It’s not unusual, Darby said, for a company that makes injection molds for the auto industry to also supply to other sectors like consumer goods. Some small businesses rely on the auto industry for a major portion of their business, but are also key suppliers for appliance, HVAC or aeronautics companies—and those firms already face serious competition from China.

The auto industry is one that Canada has historically treated as too big to fail. The government intervened to help bail out both Chrysler and General Motors during the 2009 recession to save an estimated 100,000 jobs in the country.

There’s no sense yet how long the tariffs will last and whether automakers will find themselves in nearly as severe of a predicament as in 2009. But executives at Canadian auto suppliers like Guelph, Ont.-based Linamar have warned that carmakers across North America could see production grind to a halt in as little as a week, since it could take months for them to find affordable replacements for specialized Canadian parts.

One option is to accelerate the review of the United States-Mexico-Canada trade pact—which can’t be done overnight due to consultation requirements, but could eventually provide more certainty to businesses, Adams said. 

The Canadian government has put vehicles on its list of potential countertariffs it plans to introduce in 21 days in response to Trump’s trade war. The government will carry out public consultations and work with business and provincial leaders before proceeding with the vehicle countertariffs. 

The question remains how Canada keeps this huge chunk of its economy afloat in the meantime—particularly if the U.S. government brushes off Canada’s plan to use retaliatory tariffs as bargaining chips. Some auto-related companies are locked into contracts that leave them few options to simply move money and supply chains around, said Adams.