Our country’s manufacturing has been sentenced to death by tariff—but there’s a way, if they’re smart, that the Liberals can save it

The Liberals’ inaction might be even worse. Though there’s been much consulting with industry, there seems to have been precious little actual planning, most troubling when we now have fewer than 80 days until Trump imposes industry-destroying 50% tariffs on Canadian-built automobiles. Perhaps said indifference is because Canadians seem ambivalent to the industry’s survival. Maybe it’s that the cars produced in Canada — just a single BEV model amongst them — offend the Liberals’ environmental caucus.

Whatever the case, if in six months hence you read that our auto industry has been sacrificed for “the greater good,” understand that it will be because the Prime Minister has made the simple calculation that while futzing with the dairy industry would cost him seats in Quebec, ditching the auto industry probably won’t lose him any in Ontario. As to why the Liberals might be in such a rush to have their own Avro Arrow moment, I have no clue.

Indeed, as far as I know — and anyone who knows otherwise, please feel free to leave a link in the comment section — the only person proposing a comprehensive alternative to America’s demands for auto tariffs is Stephen Beatty. Former vice-president and corporate secretary for Toyota Canada, former chair of Auto 21 and the Global Automakers of Canada, and current auto industry analyst — with his thoughts available via the digital pages of Driving.ca — he’s about to unveil a detailed plan that spells out exactly what tariff positions we can concede, what penalties we should impose if the Americans don’t come back to the negotiating table, and some new regulations that just might be enough to get presidential approval for a deal both Canada and the U. S. desperately need. Here’s a synopsis.

Any time you want to make a deal, the most important determinant is understanding exactly what the other side wants. And, as confusing as Trump’s demands may be — even the American negotiating team can’t seem to agree on what he wants — there are some goalposts that Canada’s negotiating team, Dominic LeBlanc and Janice Charette, can address using a plan like Beatty’s. The most obvious is that Misters Greer and Lutnick — the U.S. Trade Representative and Secretary of Commerce, respectively — want more American content in the cars sold In the United States. Second, and almost as important, they want to eliminate most, if not all, Chinese content from the North American auto industry’s supply chain.

Less obvious — but probably even more significant — is that Trump wants to institute these trade barriers without having to seek the approval of Congress. Indeed, perhaps the least understood part of our trade impasse with the United States is that he is not trying to renegotiate the Canada-United-States-Mexico Agreement, but rather, trying to overwrite it with those 232 tariffs that pundits are always at pains to explain.

Simply put, CUSMA can only be amended by the House of Representatives and Senate, over which Trump has diminishing influence. This last, according to Beatty, could actually be good news for Canada: reversing presidential orders is relatively easy compared with, again, getting 218 representatives and 60 senators to agree on revisions to a trade agreement. In other words, eliminating — or reducing — these 232 trade barriers once Trump is gone will be a lot easier than reversing any changes we might make to CUSMA.

Given all those considerations, Beatty says that the road forward — at least a road acquiescent enough to get the U.S. president to sign on the dotted line — would be to keep the current 232 tariffs and then carve out more effective exceptions for them. In fact, if cars produced in Canada don’t meet CUSMA requirements, Beatty suggests that they should remain subject to “full 232 treatment.” In simple terms, the first tier of Beatty’s three-part plan would see non-complaint cars — which numbered as high as 20% of Mexico’s exports to the U.S. in recent years — hit with the full 50% tariffs Trump has promised for January 1.

Any time you want to make a deal, the most important determinant is understanding exactly what the other side wants

The second tier would be similar to what Trump, Lutnick, et al are currently offering, namely that Canadian auto exports to the U.S. that are CUSMA-compliant would be saddled with a 15% tariff that could be reduced “to a level below other preferred American trading partners” by allowing American content to be deducted. The resultant ‘effective’ tariff would be somewhere around 7%, says Beatty, below the 15% rate of duty that applies to cars shipped to the U.S. from Japan or the European Union, a key point because it discourages existing Japanese automakers from shipping their products from Japan to the U.S. rather than from Canada.

The third tier that Beatty proposes is new. For one, it incorporates the “enhanced” content rules that Trump proposed before everyone walked away from the bargaining table. It lifted the regional value content — the value of parts in a car that must be produced in either Canada, the United States, or Mexico — to 80%, half of which must come from America. On top of that, Beatty suggests adding a tariff-rate quota only available to importers for whom American-assembled vehicles account for at least 50% of annual sales in the United States. In essence, this would be an “America-first” clause forcing all automakers to build more cars in the U.S. before considering increasing manufacturing in Canada.

In return, those automakers could continue to ship cars from Canada to the U.S. tariff-free as they did under CUSMA. With a few additions — such as a proviso that non-market economies would not be eligible for any of these reduced tariff benefits — Beatty’s plan would essentially prevent Chinese brands from using Canada as “a manufacturing base for accessing the U.S. market,” currently the White House’s biggest bugaboo.

All told, Beatty says, such a three-tiered agreement would meet pretty much all of America’s demands. Besides limiting Chinese “intrusion” into North American supply chains, it maintains the 232 tariff Trumps loves so; it does not require Congressional approval; and it allows Canada to lift its counter-tariffs on U.S.-built cars, in a way that would see American auto parts sourcing increase significantly. Perhaps most importantly, it encourages all automakers to maintain a minimum manufacturing footprint — that 50% of cars sold in the U.S. — in America.

As Motor Mouth has long contended, the health of America’s automotive industry, especially the Detroit Three, is far more dependent on Canada than Trump — or his many minions — understand. In fact, says Beatty, the effectiveness of this strategy “hinges upon Canada’s ability to demonstrate that it retains leverage to impose significant trade costs on the United States.”

In this regard, Beatty suggests many of the same strategies that you’ve already read on these pages. Perhaps we should be threatening counter-tariffs on America-built pickups, for instance, to coincide with Trump’s promised January 1 tariffs. General Motors, Ford and Stellantis, as Motor Mouth has previously discussed, sell some 300,000 trucks in Canada, a loss of which would be a dramatic blow to their profitability.

Beatty also suggests developing a modified Electrification Mandate — I wonder where he got that from — that would not only reduce greenhouse-gasses regulation, but also insist that all cars sold in Canada be at least partially electrified (e.g. hybrids). This would put further fiscal pressure on the Detroit Three, which are increasingly returning to “gas-guzzling” as their powertrain attribute of choice. Again, this should be proposed for January 1, a reminder to The Donald that Canada really does have at least a little leverage in these negotiations.  

If none of this worked, then we’re faced with the global pivot that Motor Mouth has long proffered as an alternative. Not only would we need to change our homologation standards to access vehicles from the E.U., but we would use those markets as alternative homes for the Canadian-produced cars no longer being exported to the United States. As Beatty explains, Honda and Toyota would then “substitute Japanese production for Canadian cars in the U.S., and use Canadian production to service markets previously supplied from Japan,” though it is unlikely the E.U. could make up for all the cars the two Japanese giants are currently shipping south of the border.

As detailed as Beatty’s framework is, there is still room for negotiation when — if? — the two sides ever get back to the table. For instance, all Canada’s existing automakers — as a reminder, GM, Ford, Stellantis, Honda, and Toyota — will easily pass that 50% requirement for American auto assembly, and chances are that all could lift that threshold to 60% and still not have to cut Canadian production to any meaningful degree. Whatever the details, the government needs to communicate these offers as soon as possible, just as we need to put the alternative — tariffing the crap out of Detroit’s pickups — on the table right now.

After all, if Trump really wants to play chicken, we have to give him time to TACO.

Author’s Note: Stephen Beatty will post “The New Phase of Automotive Trade Policy for Canada” next week on his blog, Beattyblog.ca. Alternatively, you can hear him speak to this and other subjects at TalkAuto 2026 on November 5 at 10:20 a.m. at Universal EventSpace, 6250 Highway 7, Vaughan, Ontario.

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