Will Trump blow up Canada’s $50 billion EV sector?

Canada has secured more than $50 billion in EV-related investment over the past three years, all gearing up for US demand, with Canada’s economy “deeply intertwined” with the US – but Trump may throw a major wrench into the plan.

As newly elected president Donald Trump soon returns to the White House, Canada is now facing a mountain of worries and what-ifs, particularly in the auto sector, from possible new tariffs on Canadian-made vehicles to a breakdown in electrification policy, shifting the market completely. Plus the country could see 60 years of “cross-border automotive consensus” come to a screeching halt, reports Automotive News in an in-depth look at the issue.

“We’re so intertwined. Half of the vehicles made in Canada are made by American companies,” Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, told Automotive News. “If he cuts out Canada – pulls it out of the [United States-Mexico-Canada Agreement], puts up a tariff wall – he’s hurting General Motors, Ford and then assets of Stellantis … He’s hurting American parts companies, American materials suppliers.”

A lot of possibilities are at play, including a 10% tariff on global imports into the US, which would cut tens of billions of dollars out of Canada’s GDP, and those cuts will especially hurt the auto sector, the report said.

Prime Minister Justin Trudeau jumped into action to congratulate Trump after the win, nudging that two countries have “deeply intertwined” economies, with Ottawa now at work tackling critical cross-border issues.

Trump, who has been eager to denigrate EVs, has said that he’ll make quick work of rescinding Biden’s Inflation Reduction Act, which has put billions of dollars into battery supply chain projects. He has said too that vehicles made in Mexico would see as much as a 200% tariff, and vehicles from China, Europe, and elsewhere will likely see higher tariffs.

Of course, billions of dollars in investments into EV production under the IRA have been taking place in red states, such as South Carolina, Ohio, and Georgia, so it’s unlikely he’d be willing to take away investment and jobs from his core constituents.

After the election news yesterday, US EV makers Tesla, Lucid, and Rivian, and EV battery maker LG have all said that they are ready to work with Trump to ensure EV technology continues on pace – but that will mean or how it will work is not yet clear.

Of course, Musk’s role in all of this and his sway on Trump is yet to be determined, and that will have far-reaching impact on countries like Canada – “You might see some sort of moderating effect there that they can’t walk away from [EV supports] completely because that will make life really tough for Tesla,” said Brendan Sweeney, managing director of the Trillium Network for Advanced Manufacturing.

Detroit’s Big Three – Ford, GM, and Stellanis – all have heavy footprints in Canada, with thousands of unionized auto workers there, so Trump’s decisions will impact not only those companies but a range of part suppliers as well.

This week, BYD has decided to stall its plans to enter Canada, likely deterred by the country’s 100% federal tariffs on EVs imported from China and looming decisions coming from the US. The move puts a pin on the plan after months of legwork over the summer, with BYD execs meeting with dealers across Canada to discuss a possible distribution network of the brand’s vehicle and talking with lobbyists on how to get the federal government on board.

Back in August, Prime Minister Justin Trudeau told reporters that the government would follow the US’s plan to impose stiff tariffs on EV imports from China.

Of course, getting mines for critical minerals up and running on the home front is top of mind for Canada, to cut China out of the equation, said Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, according to the report. The goal here is to prove that Canada is doing its part to “decouple” from China to avoid tariffs, which he says won’t be easy, but “we have to show the Americans that we are ready to go.”