By Paul Vieira
OTTAWA--Canada is mulling incentives for automakers to maintain and expand operations here by issuing credits that exempt them from retaliatory tariffs on U.S.-made cars they want to sell to the Canadian public.
The credit system is an element of a new automotive strategy that Prime Minister Mark Carney unveiled this month, designed to preserve domestic motor-vehicle assembly and auto-parts production amid President Trump's 25% tariff on all foreign-made cars. On Friday, the Department of Finance issued proposed changes to a waiver system currently in place that allows automakers that make cars in Canada to import vehicles from their U.S. plants without facing Canada's own 25% retaliatory levy.
The present waiver system gives automakers operating here--in particular, the big Detroit companies--a quota of cars they can import from the U.S. without being subject to tariffs. Canada has cut the allowable quota allotted to Stellantis and General Motors due to their decisions to curtail production in the country.
The waiver system would be replaced by credits. The credits would be issued "based on each company's contribution to the domestic automotive industry," the department said in a consultation paper. "In essence, the more a company produces and invests in Canada, the more import credits it would earn."
Canada added that the credits would be tradable, so companies with a surplus could sell them to other car makers seeking to import U.S.-made vehicles into Canada. Companies without a sufficient number of import credits would have to pay Canada's retaliatory tariffs, according to the finance ministry's consultation paper.
Such a credit system "can work but it doesn't give you as large an automotive base, necessarily," said Stephen Beatty, a former senior executive at Toyota Motor's Canadian unit.
Trump has repeatedly said that the U.S. doesn't need cars made in Canada. The auto-specific levies are a tool Trump is deploying to persuade global automakers to shift operations from abroad to the U.S. to serve the American market. The strategy has had an impact. Last year, Stellantis said it would transfer production of its Jeep Compass model from a Toronto-area factory to Illinois.
Under the credit system, automakers gain credits for vehicles produced here. On top of that, Ottawa is also looking at the distribution of extra credits to manufacturers that: produce engines, batteries and transmission in Canada for vehicle assembly; enter the Canadian market for the first time; and use an increasing amount of Canadian content in production.
Officials say Canada's auto strategy is focused on rewarding car companies that are building here and expanding their operations. Data from the Trillium Network for Advanced Manufacturing, a nonprofit organization, indicate that the share of auto production in Canada from Stellantis, GM and Ford has declined to 23% last year from 56% in 2016. Conversely, Honda and Toyota account for 77% of auto production.
Brian Kingston, head of the Canadian Vehicle Manufacturers' Association, said earlier this month that the proposed credit system must reward auto companies with existing investments here. His group represents GM, Stellantis and Ford, and Kingston said those companies have invested about $9 billion in their factories since 2022. He added the three companies operate nine assembly plants, and eight auto research-and-development centers.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
February 27, 2026 12:30 ET (17:30 GMT)
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