Ford's $3 billion Canadian bet is getting caught in trade-war crosshairs

By Claudia Assis and Victor Reklaitis

U.S. home builders also face a new challenge because of increased import taxes on construction materials

Vehicles built in U.S. carmakers' Canadian factories will face an increase in U.S. tariffs on their products in about four months.

President Donald Trump's threat to double tariffs on Canadian vehicles and car parts has thrust Ford to the center of the escalating trade war between the two countries.

Trump earlier Monday vowed to slap a new 50% tariff on Canadian-built automobiles and parts starting Jan. 1, after imposing a separate set of 50% tariffs on the U.S.'s northern neighbor over the weekend.

"On January First, 2027, Tariffs on all Cars, Trucks, both large and small, Automotive Parts, and Steel, will be increased to 50%," Trump said in a social-media post. "Build in the U.S. and there are ZERO TARIFFS."

Ford (F) is planning to start production of some of its popular F-Series Super Duty pickups, among its most profitable vehicles, at an assembly plant in Ontario later this year.

The move, announced in 2024, was part of Ford's pivot away from electric vehicles. The Ontario plant had previously been slated to build Ford EVs.

Ford then announced a $3 billion investment in the plant in Oakville, Ont., with plans to add production of up to 100,000 Super Duty vehicles by expanding production of the trucks across three plants in North America. Plants in Kentucky and Ohio that make the trucks - the best-selling vehicle in the U.S. for decades running - were operating at full capacity.

Ford did not immediately return a request for comment. The stock fell by as much as 4% on Monday and ended down 3.3%, at its lowest in three sessions.

General Motors (GM) already makes some of its trucks in Canada, including the popular Chevy Silverado, but Wall Street estimates that only about 2% of GM's U.S.?sales are of vehicles imported from Canada.

Shares of Jeep parent Stellantis (STLA) also dropped on a mixed day for U.S. stocks. Stellantis is enmeshed in a long-running dispute with Canada over government investments for the retooling of one of its Canadian plants.

Even before Monday's decline, the Big Three automakers had been dealt a setback early Saturday when a new trade deal between the U.S. and Canada failed to get finalized, leading the Trump administration to roll out its 50% tariffs on $20 billion worth of Canadian imports - and spurring Canada to announce retaliatory levies that will start Sept. 8.

If the deal had gone into effect, U.S. tariffs on Canadian-built automobiles had been expected to drop to 15% from 25%, in what would have been a win for the Detroit carmakers. Instead, their Canadian factories will face an increase in the U.S. tariffs on their products in about four months. Meanwhile, vehicles built in the European Union, Japan and South Korea enjoy a U.S. tariff rate of 15%.

A trade group that represents Ford, GM and Stellantis, the American Automotive Policy Council, has previously complained about trade policies that provide lower tariffs for vehicles imported from Asia or Europe than for North American-built vehicles with high U.S. content. On Monday, the council's president, Matt Blunt, said in a statement: "We urge U.S. and Canadian negotiators to reach a deal that enhances North American auto competitiveness and brings about a successful USMCA review."

American home builders also are viewed as among the big losers due to the new trade tensions between the U.S. and Canada.

The Canadian goods facing new 50% U.S. tariffs as of early Saturday include construction materials such as cement, paints, plywood, medium-density fiberboard and particleboard.

The new U.S. tariff plan for Canada was first floated in late July, and the National Association of Home Builders offered a warning at that time. On Monday, the NAHB said tariffs on building materials "heighten market uncertainty, strain supply chains and increase construction costs." The trade group also said it's "urging the administration to exempt building materials in light of the ongoing housing affordability crisis."

While certain U.S. sectors are facing headwinds from the new tariffs on Canadian goods, analysts have said the broad economic effects of the levies could be modest for the U.S. overall, as they only cover about 5% of total Canadian imports. The average U.S. effective tariff rate on Canada has risen to around 6% from about 3%, according to RBC analysts.

-Claudia Assis -Victor Reklaitis

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08-24-26 1622ET