Just when the dust seemed to settle, here he goes again. President Trump has stirred the pot on Canadian auto tariffs, casually dropping the hint that they "may go up" in that off-the-cuff style that's become his trademark in economic diplomacy—if you can call it diplomacy.
The timing? Peculiar, to say the least. Only weeks ago, his administration was making noises that suggested a warming trend in North American trade relations. Markets had actually begun to relax a bit. The auto sector stocks ticked upward through the early spring. Those gains? Well, they're being reassessed now. Frantically, in some trading floors.
I've covered trade tensions since Trump first took office, and what we're seeing is classic Trump playbook material—make a threat, sort of walk it back, let everyone breathe for five minutes, then casually toss the grenade back into the room while pretending it's just an innocent observation. It's absolutely maddening for people trying to run businesses with any kind of predictability.
The genius of this approach (and I use "genius" with a certain reluctance) is how it creates this cloud of anxiety that never fully clears. Canadian auto manufacturers have lived under this shadow so long they've practically built it into their business models—like farmers who just expect occasional hailstorms. It's there. It's always there.
Look, let's talk actual economics for a second. The North American auto supply chain isn't just integrated—it's practically a single organism. Parts zip back and forth across borders like they're running a relay race. A "Canadian" car might've crossed the border five or six times during assembly. Taking a tariff hammer to this delicate watch mechanism isn't just clumsy—it's self-destructive.
Anyone with basic math skills (which I hope includes most policymakers, though sometimes I wonder...) can tell you these tariffs would hurt American consumers and workers almost as badly as Canadian ones. Prices up, choices down, jobs at risk. Not exactly the "winning" we heard so much about.
But here's what most analysts miss: The threat alone changes behavior. That's the whole point.
I spoke with a procurement manager at a major parts supplier last month who told me they now include a "Trump factor" in all Canadian facility investments. "We discount expected returns by about 15 percent just based on tariff risk," he admitted, after I promised not to use his name. "It's basically a political uncertainty tax."
What's fascinating is how markets have developed antibodies to these announcements. The first time Trump threatened Canadian auto tariffs back in 2018, it was panic stations. Now? A collective eye-roll, some portfolio hedging, and everyone goes back to their coffee. Trading algorithms have literally been reprogrammed to yawn at presidential trade threats.
The industry's response has been... complicated. Diversifying away from U.S. exposure makes logical sense, but have you seen a map lately? Canada and the U.S. share the world's longest undefended border. Geography is destiny in manufacturing. So these companies end up in a kind of strategic limbo—unwilling to double down on cross-border integration but unable to fully disentangle themselves.
(This reminds me a bit of dating someone who keeps threatening to break up with you. At some point, you either leave or learn to live with the drama.)
The bigger picture—and there always is one—shows how uncertainty itself has become a weapon in modern economic statecraft. Can't predict what the rules will be in six months? Then you'll be extra accommodating now, won't you?
Markets eventually price in everything, even chronic unpredictability. The question hanging over boardrooms from Toronto to Windsor is whether we've hit the point where these threats have lost their bite—like a parent who's threatened to "turn this car around" one too many times.
But that, of course, only creates pressure for more dramatic threats next time.
Stay tuned, I guess. I know I'll be watching. Not like we have a choice.
