AUTO BELT ANXIETY: WHERE SOUTHWESTERN ONTARIO STANDS A YEAR AFTER TRUMP 2.0
By: Jonathan Juha
To say 2025 was a tough year for Canada’s auto sector — which looms large and is concentrated in Southwestern Ontario, stretching from Windsor in the west to Guelph, Cambridge and Woodstock in the east — would be an understatement.
Jan. 20 marked one year since Donald Trump swept back into office, ushering in protectionist policies and igniting a trade war between Canada and the United States. The resulting uncertainty has battered the auto sector.
The direst predictions made after Trump imposed punitive 25-per-cent levies on Canadian-built vehicles and auto parts — aimed at forcing automakers to move production south of the border — have not come to pass. That is partly due to protections under the Canada–United States–Mexico Agreement, better known as CUSMA, that have provided some shelter for the industry.
But one year into Trump’s return to power, it is clear the auto industry remains on shaky ground. All eyes are now turning to the upcoming review of the trilateral free-trade agreement in July, with the future of the sector — and thousands of well-paying jobs — hanging in the balance. One year in, here’s how the auto industry has changed and the importance of 2026 for its future. Jonathan Juha reports.
Torpedoed by tariffs
Before Trump’s second term, Canada’s auto sector appeared to have found its footing, betting heavily and pivoting hard toward an electrified future.
The excitement over the industry’s new direction was underscored by multibillion-dollar announcements, such as a new battery plant in nearby St. Thomas by Volkswagen and one in Windsor by Stellantis, the parent company of Chrysler and Jeep, and LG (since opening late last year, the plant has shifted focus from batteries to producing energy-storage systems in response to slumping demand for EV batteries).
Both the provincial and federal governments also jumped on the EV bandwagon, promising hundreds of millions of dollars in taxpayer money to support the shift from combustion engines to electric vehicles and bring stability to thousands of auto-sector workers.
But without a doubt, the first major blow to those hopes came with tariffs introduced by the Trump administration, which sowed uncertainty across the sector — a no-no for any industry, but especially one where profit margins are often thin.
“I would say it’s a cause for concern for the entire industry, the way things have transpired over the course of last year,” said David Adams, chief executive of Global Automakers of Canada, an umbrella group for foreign automakers operating in the country.
“When we have uncertainty around our ability to access the U.S. market, that does create a more challenging environment for vehicle production in Canada . . . it’s going to require a lot of planning and agility for manufacturers to continue to make the case that Canada is a good place to invest.”
Adams, whose group represents companies such as Toyota, Kia and Mercedes-Benz, said Canada’s auto sector is “battered but not broken.”
Tariffs alone, however, haven’t changed the outlook for the industry. Along with the levies, Trump also brought a shift in policy, ending subsidies for the purchase of electric vehicles — incentives that, in the short term, had encouraged automakers to invest heavily in the technology.
The end of EV incentives, which were also stopped in Canada, has led to a drop in consumer demand, as electric vehicles continue to carry higher price tags than gas-powered ones. With new projections showing fewer EV sales, automakers have adjusted their strategies, in some cases ending production of certain electric models altogether.
“For Canada, we had based a lot of our future — and still are basing our future — on that technology transition from internal combustion engines to electric vehicles,” Adams said. “I think that will continue, but it’s going to be a much slower process.”
Protected by CUSMA, burned by the end of incentives
When Trump first announced tariffs on Canadian-made vehicles, some industry watchers predicted they would lead to the decimation of the country’s auto sector.
Those projections, however, have not yet come to pass. CUSMA-compliant vehicles and parts have, to varying degrees, been given a reprieve from the full levies, softening the blow.
Still, the industry has been far from unscathed.
While Volkswagen has moved ahead with plans to build its battery plant in St. Thomas — attracting Vianode, a Norwegian company planning a $3.2-billion factory to produce synthetic graphite for EV batteries — other manufacturers have moved in the opposite direction.
Honda, for instance, announced last year it was postponing plans to retool its Alliston plant and build a battery facility there.
Ford has also scrapped plans to turn its Oakville assembly plant into an electric vehicle manufacturing hub, instead pivoting back to gas-powered vehicles.
Though Stellantis added a third shift at its Windsor plant — where production of the SIXPACK-powered Dodge Charger R/T and four-door SIXPACK-powered Charger models is set to begin this year — the U.S.-based automaker also announced in 2025 it would move production of the Jeep Compass from Brampton to Illinois.
General Motors, meanwhile, citing slumping sales of its electric BrightDrop delivery van, has shut down production at its Cami plant in Ingersoll. The automaker also is moving forward with plans to cut a shift at its Oshawa assembly plant this year, leaving nearly 2,000 workers in limbo between both decisions.
Unifor national president Lana Payne said the fact the worst-case scenario has not materialized yet does not mean the sector hasn’t been badly bruised, with workers bearing the brunt of the impact.
“I think why probably some analysts would be saying it’s not as bad is because everyone last year was like, ‘Are we going to have anything left by the end of the year?’” she said. “But that shouldn’t take away from the real situation we’re in right now, which is that we’ve seen a bleeding of investment out of the auto sector in Canada.
“We’re not in a place of things settling out. The chaos and uncertainty is continuing,” she added.
What lies ahead in 2026
Though many economists and industry watchers had hoped for a quick resolution to the trade dispute, that never materialized and Canada entered 2026 with its sights squarely on the CUSMA deal review, slated to begin in July.
While most exports to the U.S. are covered under the free trade agreement, the country is still grappling with sector-specific tariffs that, beyond cars, affect other industries such as steel and aluminum.
What analysts largely agree on is that until an agreement is reached, companies’ appetite to pour money into Canada will remain limited.
“You’ll probably see the lag in investment continue until they renegotiate the free trade agreement and we see what happens in and around that,” said Jason Bates, manager of the Excellence in Manufacturing Consortium. “Once that’s firmed up, and manufacturers kind of know the field they’re playing on, then they can adjust from there.”
If no countries can’t reach an agreement during the review, the deal could be revisited annually until USMCA expires in 2036.
Adams, the head of the umbrella group representing some automakers, said he expects the U.S. will push for more concessions from Canada and Mexico, likely in the form of higher U.S. content requirements for vehicles sold south of the border.
While a rupture of the trade deal would be the worst possible outcome of the negotiations, Bates sees that as unlikely. Still, he said Canada will likely have to adapt to a new reality in which tariffs on vehicles are part of the equation.
That is a reality Payne, however, refuses to accept. She said that while the Canadian market is smaller than the U.S., Canadians still spend about $100 billion a year on cars.
That, on its own, should give Canada an important card to play in the upcoming negotiations, she said.
“The reality is that those companies need this market to help their bottom line,” Payne said.
“And Canada can say, ‘We’re not going to make it that easy for you to have access to that market. We expect you, as auto companies, to build in Canada because you sell in Canada,’ and that is the principle by which we need to go into these trade talks.”
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2026-01-22T07:48:23Z