{"id":21166,"date":"2025-10-17T19:08:23","date_gmt":"2025-10-17T19:08:23","guid":{"rendered":"https:\/\/www.rbc.com\/en\/?post_type=rbc_tl&p=21166\/the-era-of-messy-managed-trade-is-here"},"modified":"2025-11-06T15:15:14","modified_gmt":"2025-11-06T15:15:14","slug":"trade-zone-can-the-canada-u-s-auto-pact-survive","status":"publish","type":"rbc_tl","link":"https:\/\/www.rbc.com\/en\/thought-leadership\/the-trade-zone\/trade-zone-can-the-canada-u-s-auto-pact-survive\/","title":{"rendered":"Trade Zone: Can the Canada-U.S. auto pact survive?"},"content":{"rendered":"\n
\n
\n

In this week’s edition<\/strong>: Is Stellantis the first domino to fall? And how Canada can strengthen its role in an REE-bifurcated world.<\/p>\n\n\n\n

Is this the end of the auto pact?<\/strong><\/h2>\n\n\n\n

By Jordan Brennan<\/strong>, RBC’s Head of Thought Leadership<\/em><\/p>\n\n\n\n

Frustration is building in Canada\u2019s auto sector. And concern. <\/p>\n\n\n\n

Less than one week after U.S. Secretary of Commerce Howard Lutnick told a Canadian audience that \u201ccar assembly is going to be in America and there is nothing Canada can do about it,\u201d Stellantis announced it will shift planned Jeep Compass production from Brampton to Belvidere, Illinois.<\/p>\n\n\n\n

This looks like the fruits of America\u2019s trade strategy, which aims to re-industrialize America through re-patriation of manufacturing capacity.<\/p>\n\n\n\n

The fear: Stellantis is the first of many dominos to fall. <\/p>\n\n\n\n

Canada\u2019s original managed trade <\/em>in autos\u2014the 1965 Auto Pact\u2014tied duty-free access to production and value-added commitments in Canada, catalyzing continental supply-chain integration and shifting Canada from many low-volume domestic models to fewer, high volume North American models.<\/p>\n\n\n\n

Today, Canada exports roughly nine-in-ten Canadian-made vehicles to the U.S. In any ordinary business, reliance on a single customer would be intolerable. But it appeared tenable through the Auto Pact and NAFTA eras. Today\u2019s push to re-patriate Canadian auto jobs is a reversal of the 1965 logic. And it reminds us about our dangerous concentration risk.<\/p>\n\n\n\n

In the face of the trade turmoil, Prime Minister Carney has pursued a strategy of patient diplomacy. What are Canada\u2019s options if that doesn\u2019t work?<\/p>\n\n\n\n

The U.S. assembles 10-11 million vehicles annually, most of which are sold within the domestic market. Some 15% of American-made vehicles are exported. And in any given year, one-third of those exports are shipped to Canada, making us the largest export market. Closing the door on American imports would hit a channel equal to 7-10% of annual U.S. production.<\/p>\n\n\n\n

Then there is the China angle. Beijing slapped a 75% provisional duty on Canadian canola in August. China\u2019s ambassador has since proposed reciprocity\u2014lifting canola and pork tariffs if Ottawa removes its 100% tariff on Chinese EV\u2019s. Premiers Scott Moe and Wab Kinew have urged Ottawa to explore the proposal, which would intensify competition with Tesla, for example.<\/p>\n\n\n\n

Other options include sectoral deals with Germany, Japan and South Korea. Think LNG offtake for defence procurement commitments\u2014with auto-assembly mandates as part of the package negotiations.<\/p>\n\n\n\n

While none of these options are great, Canada has leverage\u2014as America\u2019s top auto export market and a deeply integrated supplier base. This only works if used surgically. America\u2019s real economic competition and strategic threat comes from China, not Canada. A grand bargain that locks in North American capacity and predictable market access remains the cleanest outcome. <\/p>\n<\/div>\n<\/section>\n\n\n\n

\n
\n

The week that was<\/h2>\n\n\n\n