Impact of US Trump Tariffs on Canadian Used Car Pricing

Executive Summary

This report examines the potential impact of President Donald Trump's tariffs on used car pricing in Canada, with a focus on the measures scheduled for implementation on April 2nd, 2025. Based on comprehensive research of policy details, market conditions, and expert opinions, we project that these tariffs will have significant effects on the Canadian used car market.

Key findings include:

• Tariff Policy: Starting April 2nd, 2025, Trump will implement 25% tariffs on goods from Canada that don't satisfy USMCA rules of origin, while goods qualifying for USMCA preference will remain tariff-free.
• Current Market Conditions: The Canadian used car market had been normalizing with a 12.1% price decline in 2024, but is now showing early signs of price increases as the market anticipates tariff impacts.
• Cross-Border Trade: Approximately 15-20% of Canada's used car market is currently shipped to the US, making this segment particularly vulnerable to tariff impacts.
• Price Impact Projections: In the short term (1-3 months after April 2nd), we expect immediate price drops of 3-7% in the Canadian market as export demand suddenly disappears. However, medium-term effects will likely include price segmentation based on vehicle type and age, with luxury vehicles potentially seeing larger price decreases (10-15%).
• Expert Consensus: Industry analysts predict that the auto industry can only tolerate these tariffs for a few weeks before seeing significant disruptions, with most giving a 50% probability that tariff turmoil could last for months.
• Economic Impact: Most economists predict the tariffs will contribute to economic contraction if maintained for more than a few months, with TD Economics forecasting that even 10% tariffs could lead to a sales decline of light vehicles in Canada of around 8%.