Trump’s tariffs threaten to cripple Canada’s EV manufacturing industry before it gets off the ground

Canada’s nascent electric vehicle manufacturing industry could be crippled if this, in Prime Minister Justin Trudeau’s words, “very dumb” trade war sparked by U.S. President Donald Trump drags on indefinitely. And, even if the conflict is short-lived, it’ll surely have a chilling effect on investments in Canada’s EV sector.

This will only come as great news to Chinese automakers, who will be loving the fact Trump’s tariffs will push their North American rivals even further behind on EV development and production.

While the EV sector is particularly vulnerable because it’s so young, North America’s auto industry will suffer as a whole. Industry insiders predict assembly plants in Canada, the U.S. and Mexico would shut down within a week as a result of Trump’s 25-per-cent tariff on Canadian and Mexican goods. The deeply interconnected North American auto industry would quickly grind to a halt, unable to absorb the added costs imposed by the tariffs.

The lives and livelihoods of the roughly 500,000 people directly and indirectly supported by Canada’s auto industry are at stake, as well as those of auto workers in the U.S. and Mexico.

Royal Bank of Canada chief executive officer Dave McKay said during a conference on Tuesday the auto industry will feel “enormous pain.” He also noted small business in general are already pausing investment decisions.

Brian Kingston, chief executive officer of the Canadian Vehicle Manufacturers’ Association, said in a statement that U.S. tariffs will do “significant damage” to the auto industry in North America. He didn’t have anything to add on EVs specifically, but commented that “this will undo over 60 years of integration that has fostered a globally competitive automotive industrial base.”

Electric vehicle and battery manufacturing are only a small part of Canada’s auto industry today, but crucial to the sector’s growth and long-term future. Canada is (or was until this trade war) uniquely well placed to be a key player in the EV industry, owing to our skilled labour force, raw material resources and integration with the U.S. market.

Federal and provincial governments have poured a combined total of $52.5-billion into the burgeoning electric vehicle manufacturing sector since 2020 in the hopes of grabbing a slice of the estimated US$1.2-trillion automakers will be investing in the sector by 2030. Canadian auto unions also worked hard to grab a slice of the pie, pushing automakers to make EV investments in Canada.

Those efforts were paying off. Canada’s EV manufacturing industry, despite still lagging far behind the U.S., was finally growing. Between 2020 and 2024, Canada attracted a total of $46.1-billion in investments across the EV supply chain, according to the Parliamentary Budget Officer. General Motors’ factory in Ingersoll, Ont., was the first in the country to mass produce commercial electric vans, beginning in late 2022, and it was only late last year that the Dodge Charger Daytona became the first made-in-Canada electric passenger car. The new Stellantis EV battery plant – the first large-scale plant of its type in Canada – began producing battery modules last October.

Much of the forecasted $46.1-billion being invested in Canada’s EV sector has yet to bear fruit. For example, Honda has yet to build its new battery plant in Alliston, Ont., which was announced last year as part of a huge $15-billion investment. Volkswagen’s massive battery plant, announced in 2023 for St. Thomas, Ont., is still in the early stages of construction and far from complete.

Canada’s EV industry is particularly vulnerable to this trade war because it was only just getting off the ground.

If push comes to shove, it’s easier to move a battery factory that hasn’t been built or finished yet – like those announced by Honda, VW and others – than it is to move a traditional auto assembly or parts manufacturing plant that’s been in place for decades.

Thomas Tetzlaff, a spokesperson for Volkswagen Group Canada, said in an e-mail that “PowerCo (our subsidiary that manages cell production) remains focused on their mission to ramp-up the St. Thomas gigafactory.” Tetzlaff added that the first battery cells from the plant are expected in 2027 and that the factory is still in hiring mode.

Honda and General Motors did not immediately responded when asked whether Trump’s tariffs would cancel or delay their planned battery plants in Canada.

Right before the tariffs began, however, Honda decided to shift production, which was slated to start in November 2027, of its next-generation Civic hybrid to the U.S. state of Indiana from Mexico, according to Reuters.

If (or, if the trade war drags on, when) some of these EV investments do shift from Canada to the U.S., those investments are gone for good. As James Stewart, president of Unifor Local 444, which represents workers at Stellantis’s Windsor Assembly plant, told me last year, “if you’re left too far behind [on EV manufacturing], you’ll find yourself in a position where other countries have all the technology they need, have all the investment dollars they need, and you’re sitting on the outside.”

To add insult to injury, this trade war comes at a time when governments across North America urgently need to be co-operating to ramp up EV adoption and infrastructure rollout in order to meet climate targets and mitigate the worst effects of climate change. But Trump clearly doesn’t care about the climate, just like he clearly doesn’t care about auto workers on either side of the border.