25% Surtax on U.S. Motor Vehicles

Summary#

The United States Surtax Order (Motor Vehicles 2025) puts a 25% surtax on many passenger vehicles and certain trucks that originate in the United States, starting on April 9, 2025. For vehicles that meet the CUSMA origin rules, the surtax only applies to the part of the vehicle’s value that is not Canadian or Mexican (the order treats that non‑North‑American portion as 85% of the value by default unless the importer proves otherwise).

What it does#

• Creates a 25% surtax on motor vehicles that originate in the United States and enter Canada.
• For U.S. vehicles that qualify under the CUSMA rules, the surtax is charged only on the vehicle’s value after subtracting the value of Canadian and Mexican parts. If the importer does not prove a higher Canadian/Mexican share, that share is treated as 15% of the vehicle’s value.
• Importers who claim a larger Canadian or Mexican parts share must provide documentary evidence if requested.
• Exempts certain special import categories listed under Chapters 98 and 99 of the tariff schedule (see Schedule 2 of the Order).
• Does not apply to vehicles already in transit to Canada on April 9, 2025.
• The Order is made under the Customs Tariff and is administered by the Canada Border Services Agency.

Who's affected#

• Car and truck importers and distributors who bring U.S.‑assembled vehicles into Canada.
• Vehicle dealers and retailers who sell affected U.S. models to Canadian buyers.
• Canadian consumers who buy vehicles that are subject to the surtax.
• Auto manufacturers and parts suppliers in Canada and the United States, because the measure targets trade flows across the integrated North American supply chain.
• The Canada Border Services Agency, which will apply and enforce the surtax at the border.
• If unclear: the Order lists specific tariff items (see Schedule 1) that define which vehicle types are covered; people unsure whether a particular model is affected should check its tariff classification or ask their importer/dealer.

Why it matters#

• The surtax is a direct response to U.S. tariffs on vehicles (announced by the U.S. and effective April 3, 2025). It aims to restore reciprocal market access between the two countries.
• It could raise the retail price of some imported U.S. vehicles in Canada if importers pass the surtax on to buyers.
• The measure is designed to protect sales for Canadian production. Canada exported $44.4 billion in finished vehicles to the U.S. in 2024 and imported $35.6 billion from the U.S., and the auto sector supports about 550,000 direct and indirect jobs.
• Over time, importers and dealers may shift sourcing away from U.S. models, and buyers may favor Canadian‑made or non‑U.S. vehicles — with possible effects on supply chains and local parts producers.
• The surtax is meant to be reversible: if U.S. tariffs on Canadian vehicles are removed, Canada says it would repeal these counter‑measures.