President Trump's threat of 50% tariffs on Canadian autos and auto parts is more of a negotiating tactic than a settled policy, UBS analysts believe.
In a note Tuesday, the bank argues that the January 1, 2027 start date functions as pressure to restart trade talks rather than a firm commitment, and that the impact would fall unevenly across automakers rather than hit the industry as a whole.
The threat followed a weekend breakdown in US-Canada trade talks, with tariffs on large trucks reported as a main sticking point, just as the two sides appeared close to a deal that would have cut tariffs on Canadian-made vehicles to 15% from the current 25% for non-US content.
Canadian Prime Minister Mark Carney's government has signaled little chance of resuming trade talks before the US midterm elections on November 3, analysts noted.
“In our view, this could be a way for the US to give more time for negotiation while also providing a deadline for negotiations to ramp back up,” analysts wrote.
UBS said the current tariff has not been a meaningful headwind for Ford Motor Company (NYSE:F), which does not build vehicles in Canada today, but that will change as Super Duty production ramps up there into 2027, with Mobility Global forecasting about 83,000 units built in Canada that year.
Assuming 50% US content on those trucks, a move to a 50% tariff could work out to an effective 25% tariff on units entering the US, the analysts said.
For General Motors Company (NYSE:GM), which sources about 2% of US sales from Canada, UBS estimated the tariff increase could be a roughly $300 million headwind to EBIT, or about 2% versus 2027 consensus, assuming 45% US content.
Across the industry, UBS estimates Canadian-built vehicles make up about 6% of US sales year to date, but exposure varies widely: 0% for Ford, 2% for GM, 7% for Stellantis NV (NYSE:STLA, EPA:STLA), 9% for Toyota and 15% for Honda.
On that basis, UBS said Honda, Toyota and Stellantis stand to feel more impact than GM or Ford.