OTTAWA--Canada will cut the number of vehicles Stellantis and General Motors can import tariff-free into the country in response to the automakers' plans to reduce their manufacturing footprint.
The decision, unveiled late Thursday, represents an escalation in tensions between Canada and the automakers, as the manufacturers realign operations to deal with the Trump administration's 25% tariff on vehicles assembled abroad, including Canada. Union leaders had called on Canada's Liberal government to take a hard-line approach with the carmakers, given they benefited from government financing tied to production commitments.
Canada has, since April, allowed automakers operating in Canada to import a certain number of U.S.-assembled vehicles free of the retaliatory tariffs Ottawa imposed to match President Trump's auto tariffs. The tariff relief, officials said at the time, was contingent on automakers continuing to produce vehicles in Canada and on following through on planned investments in the country.
Canada said Stellantis and GM no longer qualify for the tariff exemption. Canada is cutting their allotment of tariff-free imports by 50% for Stellantis and 24.2% for GM.
"We expect these companies to meet their contractual obligations and respect their commitments towards Canada and their workers," said a joint statement issued by Canada's finance and industry ministers, François-Philippe Champagne and Melanie Joly.
A spokeswoman for GM referred questions to the Canadian Vehicle Manufacturers' Association, a trade advocacy group. The association didn't immediately respond to a request for comment. A Stellantis spokeswoman didn't respond to a request for comment. Canada is the largest market for exports of U.S. cars, according to data from the Commerce Department.
Canada's manufacturing sector is under duress from Trump's sector-specific tariffs, with factory owners shedding workers as they deal with increased costs and weaker U.S. demand.
Canada has threatened to sue Stellantis to recover financial aid provided this decade after the company said it would shift production of its Jeep Compass model from a factory in Brampton, Ontario, to Illinois. Canada is also applying pressure on GM after the company said it would no longer produce an electric delivery van at a plant about 100 miles west of Toronto in Ingersoll, Ontario, citing weak demand. Canada has given GM 15 days to come up with a plan to address the future of the Ingersoll factory, which employed 1,200 people at the start of the year. Canada also provided financial aid to GM linked to a retooling at the Ingersoll plant.
In a letters sent to both Stellantis and GM, Champagne, the finance minister, said the government would reconsider its decision should the companies increase production in Canada and find new work at the affected factories.
Meanwhile, U.S. heavy-truck maker Paccar cut its workforce at its plant in Sainte-Therese, Quebec, which the union representing workers there tied to U.S. trade policy. Trump said he would impose a 25% tariff on heavy trucks and truck parts, effective Nov. 1, although trucks and parts from Canada and Mexico would be exempt. A Paccar spokesman declined to comment.
Trump has repeatedly said he wants automakers to relocate their foreign operations back to the U.S., adding he doesn't believe the U.S. needs cars made in Canada. "We want to make our cars here," Trump said on Oct. 7 in the Oval Office, during a meeting with Prime Minister Mark Carney. "Americans don't want to buy cars that are made in Canada."
Canadian officials are in talks with their U.S. counterparts on tariff relief for specific sectors, such as steel and aluminum. Automobiles aren't part of the current set of talks, officials say.