CUSMA / Tariff — Trade Policy Impact on Parts Supply
Tracking how CUSMA review, Section 232 auto tariffs, IEEPA emergency tariffs, and Canadian counter-tariffs affect cross-border collision repair parts trade. HS code-level analysis with scenario modelling for negotiation outcomes.
CUSMA Decision
Jul 1
54 days
Section 232 Auto Parts
25%
In effect — CUSMA exempt
Steel / Aluminum
50%
Section 232 metals
CA Remission Expiry
Jun 30
Auto/aerospace steel/alum
Current Tariff Environment
CUSMA is the firewall. CUSMA-compliant auto parts cross the Canada–U.S. border at 0%. If CUSMA collapses or a part fails rules of origin, it faces 25% (Section 232) on top of MFN duty. Since SCOTUS struck down IEEPA tariffs (Feb 20, 2026), the worst-case stacking has reduced — but Section 232 alone remains a 25% cliff. The 10% Section 122 surcharge (IEEPA replacement) exempts CUSMA-qualifying goods and expires July 24.
Negotiation Thread Status
▾
Thread
Status
Last Movement
Impact
CUSMA Formal Review
Approaching
Jul 1, 2026 — extension decision
Determines whether CUSMA extends 16 years or enters annual review. LeBlanc–Greer talks resumed Mar 6. Greer: unlikely all issues resolved by July 1.
Section 232 — Auto Parts (25%)
In Effect
Apr 3, 2025 — annex published
25% on non-CUSMA auto parts. CUSMA-compliant parts exempt. Unaffected by SCOTUS ruling.
Section 232 — Metals (50%)
In Effect
Mar 12, 2025 — raised to 50%
Steel and aluminum at 50%. Affects body panel and structural input costs. Unaffected by SCOTUS ruling.
Section 122 (10% Global Surcharge)
Expiring Jul 24
Feb 24, 2026 → Jul 24, 2026
Replaced IEEPA after SCOTUS. 10% on all imports; CUSMA-qualifying goods exempt. Expires by law — 150-day hard limit. Admin describes as "bridge" to Section 301.
IEEPA Emergency Tariff (35%)
Struck Down
Feb 20, 2026 — SCOTUS 6-3
IEEPA does not authorize tariffs (Learning Resources v. Trump). $166B in refunds; CBP CAPE portal launched Apr 20. 35% tariff layer eliminated.
IEEPA cannot impose tariffs. Executive tariff power limited to Sec 232, 301, 122. Refund process underway.
Canada Counter-Tariffs
In Effect
Sep 2025 — scope narrowed
25% surtax on non-CUSMA U.S. vehicles. 50% matching on U.S. steel/aluminum. Most CUSMA-compliant goods exempted Sep 2025.
CA Steel/Alum Remission
Expiring
Jun 30, 2026 — expiry date
Temporary duty relief for auto/aerospace manufacturers on U.S. steel/aluminum. Expiry = cost increase.
Core Vulnerability
Canada builds cars for the U.S. market. ~85% of the 1.3M vehicles assembled annually in Canada are exported to the U.S. Under permanent 25% tariffs, Canadian assembly becomes uneconomic for U.S.-bound production. Five OEMs operate seven Ontario plants. Plant closures would hollow out the ~700 Tier 1/2/3 supplier ecosystem and restructure the collision repair parts pipeline for every affected model.
Annual review limbo is arguably worse than clean withdrawal. No OEM commits multi-billion-dollar retooling investments when the trade framework could collapse any July 1. The result is a slow bleed: no new model allocations, no new investment, gradual volume reduction as current models reach end-of-life, and supplier attrition. The parts supply chain doesn't collapse overnight — it erodes over a product cycle (5–7 years).
HS Code Tariff Matrix — Collision Repair Parts
Every collision-relevant HS code mapped against five tariff scenarios. Rates shown for U.S. import duty on goods crossing the Canada–U.S. border. CUSMA compliance is the firewall — without it, parts face 25%+ duty.
This table maps every collision-relevant Harmonized System (HS) code to its tariff rate under five different trade scenarios. Each row is a type of auto part classified by international customs code. The columns show what duty rate applies depending on which tariff regime is in effect.
Column
What it means
MFN (General)
Base duty rate without any trade agreement — the default rate that applies to most countries under WTO rules. Low for auto parts (typically 2.5–5%).
CUSMA
Current preferential rate for parts that meet CUSMA rules of origin. 0% for all auto parts. This is the rate in effect today for compliant goods. The green column is the firewall.
Section 232 (25%)
National security tariff on auto parts, enacted April 2025. Applies to non-CUSMA parts. CUSMA-compliant goods are currently exempt — but if CUSMA is lost, this rate activates.
IEEPA (35%)
Emergency tariff on Canadian goods under the International Emergency Economic Powers Act. Legal basis challenged at the Supreme Court. If upheld, this is the worst-case additional layer.
CUSMA Collapse
Effective combined rate if CUSMA ceases to apply: MFN duty + Section 232. This is the cliff — the rate that parts face if the trade agreement firewall disappears. Highlighted in yellow.
CA Counter-Tariff
Canadian retaliatory tariff on equivalent U.S. goods entering Canada. Affects parts flowing in the other direction (U.S. → Canada).
Key exceptions: Paint and coatings (HS 3208, 3214) are NOT in the Section 232 auto parts annex — they only face MFN rates. Steel and aluminum (HS 7210, 7604) are under the separate Section 232 metals tariff at 50%, not the auto parts tariff at 25%.
Why this matters for collision repair: Every part used in a repair estimate has an HS code that determines its landed cost. Under current CUSMA compliance, cross-border parts trade at 0%. If compliance is lost — through CUSMA collapse, tighter rules of origin, or anti-circumvention provisions — parts costs jump 25–50% depending on category. That cost flows directly into repair invoices, supplements, and severity-per-claim.
HS Code
Description
Parts Category
MFN
CUSMA
Sec. 232
IEEPA
Collapse
CA Counter
Notes
Reading This Table
MFN (Most Favoured Nation): Base duty rate without any trade agreement. This is what applies if CUSMA preferences are lost but no additional tariffs are in place.
CUSMA: Current preferential rate for compliant goods. 0% for all auto parts meeting rules of origin.
Section 232 (25%): National security tariff on auto parts. Currently applies to non-CUSMA parts. CUSMA-compliant goods are exempt. Unaffected by SCOTUS ruling.
IEEPA (35%):STRUCK DOWN Feb 20, 2026. Shown for reference only — this column now represents historical worst-case stacking. Replaced by Section 122 at 10% (CUSMA-qualifying exempt). Refunds of $166B being processed.
CUSMA Collapse: Effective rate if CUSMA ceases to apply — MFN + Section 232 combined. Section 122 (if still in effect) would add 10%.
CA Counter: Canadian retaliatory tariff on equivalent U.S. goods entering Canada. Scope narrowed Sep 2025; steel/aluminum/non-CUSMA autos remain.
Paint & Coatings are NOT in the Section 232 auto parts annex. They face MFN rates only.
Steel & Aluminum are under the separate Section 232 METALS tariff (50%), not the auto parts tariff (25%). Canada matches at 50%.
Tariff Scenario Definitions
Eight if/then scenarios mapping negotiation outcomes to HS code-level tariff impacts and downstream collision repair effects. Probability reflects current assessment — subject to change as negotiations develop.
S1 · PROBABILITY: MEDIUM
CUSMA Extended — Base Case
Trigger
All three parties agree to 16-year extension at July 1, 2026 meeting. Section 232 auto tariffs negotiated down.
Tariff change
CUSMA 0% maintained for compliant parts. Section 232 potentially reduced or eliminated for CUSMA goods.
Claims impact
Minimal disruption. Current parts flow continues. Cost environment stable. Canadian assembly plants continue operating.
S2 · PROBABILITY: MEDIUM-HIGH
CUSMA Extended + Tighter Rules of Origin
Trigger
Extension agreed but U.S. demands higher regional value content (RVC) thresholds for auto parts (e.g., 80% from 75%).
Tariff change
Parts failing new RVC lose CUSMA exemption → MFN + Section 232 (25%). OEMs with high non-NA content exposed.
Claims impact
Korean-sourced parts (lamps, trim, electronics) may fail tighter RVC. Cost increase for Hyundai/Kia/Subaru repair parts. Possible supply chain restructuring delays.
S3 · PROBABILITY: HIGH
Anti-Circumvention Provisions
Trigger
U.S. pushes rules to prevent Chinese-origin content entering via CUSMA partners. Mexico primary target but affects all.
Tariff change
New tracing/certification requirements for non-NA content in CUSMA parts. Chinese-origin subcomponents flagged.
Claims impact
Aftermarket collision parts from Taiwan (with Chinese facility production) face cost/certification disruption. CAPA parts at risk if facility origin scrutinized.
S4 · PROBABILITY: HIGH
Section 232 Auto Parts Persist — Status Quo
Trigger
CUSMA review proceeds but Section 232 tariffs maintained separately on "national security" grounds.
Tariff change
CUSMA-compliant parts: 0%. Non-compliant parts: 25%. Steel/aluminum: 50%. No change from current.
Claims impact
Existing cost pressure continues. Steel/aluminum input costs elevated for body panels. Non-CUSMA import parts (Korean, Japanese direct) at 25%.
S5 · PROBABILITY: MEDIUM
CUSMA No Extension — Annual Review Limbo
Trigger
Parties cannot agree by July 1. Agreement continues but subject to annual review. No withdrawal but no stability.
Tariff change
Current rates maintained year-to-year. Investment uncertainty increases. No change in tariff rates immediately.
Claims impact
No immediate parts supply change. Medium-term: OEMs reduce Canadian assembly investment → fewer Canada-built models → gradual shift to import parts supply. Slowly increasing severity-per-claim over 2–4 years.
S6 · PROBABILITY: LOW
U.S. Withdrawal from CUSMA
Trigger
Trump invokes 6-month withdrawal notice. CUSMA ceases to apply to U.S. trade.
Tariff change
All CUSMA exemptions eliminated. Every cross-border part reverts to MFN + Section 232 (25%). Vehicles: 25%.
Claims impact
SEVERE. Canadian assembly plants close or dramatically reduce output within 12–18 months. Parts pipeline for Canadian-market vehicles restructures entirely. Aftermarket becomes dominant repair source.
S7 · PROBABILITY: LOW-MEDIUM
Bilateral U.S.–Canada Deal Replaces CUSMA
Trigger
U.S. opts for separate bilateral deals. Canada negotiates standalone agreement outside trilateral framework.
Tariff change
Depends on deal terms. Could maintain auto sector preferences or impose new conditions.
Claims impact
High uncertainty during negotiation period. Parts flow disruption possible if interim tariffs applied. Eventual outcome unknown.
S8 · RESOLVED — Feb 20, 2026
IEEPA Tariffs Struck Down by SCOTUS ✓
What happened
SCOTUS ruled 6-3 that IEEPA does not authorize tariffs. 35% tariff eliminated immediately. Trump invoked Section 122 (10% global surcharge, 150-day limit) as bridge.
Removed worst-case stacking scenario. Net cost relief for non-CUSMA parts. Section 232 auto parts (25%) unaffected. Section 301 investigations now the key replacement risk.
S9 · PROBABILITY: MEDIUM — Watch Jul 24
Section 122 Expires Without Seamless Section 301 Replacement
Trigger
Section 122 expires July 24 by law. USTR Section 301 findings not finalized in time, or Congressional extension fails. Temporary tariff vacuum on non-232 goods.
Tariff change
Non-232, non-301 imports revert to MFN baselines. CUSMA-qualifying goods unaffected (already exempt from Section 122). Chinese-origin goods still face Section 301. Gap period likely short.
Claims impact
Brief cost relief on non-CUSMA, non-China aftermarket parts. Unlikely to last — admin has multiple replacement authorities ready. Creates ordering/pricing uncertainty through July.
Canadian Assembly Plant Exposure
All Canadian vehicle assembly is in Ontario. Five OEMs, seven plants. ~85% of output exported to the U.S. Under permanent 25% tariffs, every plant's U.S.-bound production becomes uneconomic. Assessment below covers each plant's tariff vulnerability and the downstream collision repair parts impact.
Toyota — Cambridge & Woodstock, ON
RAV4, RAV4 Hybrid, Lexus RX, Lexus NX (gas + hybrid) · ~400,000 units/yr · ~80% to U.S.
Permanent tariff impact
RAV4 is NA's best-selling SUV. Plant closure eliminates Canadian Lexus RX/NX production entirely. Toyota likely shifts to U.S. plants (Kentucky, Indiana) which have capacity.
Parts pipeline risk
RAV4 parts pipeline from TMMC ceases. Lexus parts supply restructures to Japan-direct for Canadian market. Collision parts for existing fleet shift to import sourcing with tariff exposure.
Honda — Alliston, ON
Civic (gas + hybrid), CR-V (gas + hybrid) · ~390,000 units/yr · ~75% to U.S.
Permanent tariff impact
Civic and CR-V are high-volume. Honda has U.S. capacity (Marysville, East Liberty) but would need to absorb volume. Canada may lose CR-V hybrid production.
Parts pipeline risk
Canadian CR-V/Civic parts served partly from Alliston supplier ecosystem. Plant closure shifts to U.S. parts warehousing. Less disruption than Toyota due to Honda's deeper U.S. network.
GM — Oshawa, ON
Silverado 1500, Sierra 1500 (select trims) · ~200,000 units/yr · ~85% to U.S.
Permanent tariff impact
Oshawa primarily serves U.S. full-size truck demand. GM has Fort Wayne and Flint capacity. Plant would be a first rationalization target under permanent tariffs.
Parts pipeline risk
GM parts infrastructure is deep in both countries. Minimal collision repair disruption — parts supply shifts to U.S. hubs with existing coverage.
GM — Ingersoll, ON (CAMI)
BrightDrop Zevo (commercial EV) · ~20,000 units/yr · ~90% to U.S.
Permanent tariff impact
Low-volume commercial EV. Tariff makes unit economics unviable for U.S. delivery fleet customers. Plant likely idles.
Parts pipeline risk
Minimal collision repair relevance — commercial fleet vehicles with low body shop volume.
Stellantis — Windsor, ON HIGHEST RISK
Chrysler Pacifica, Grand Caravan (gas + PHEV) · ~180,000 units/yr · ~70% to U.S.
Permanent tariff impact
Windsor is sole global source for Pacifica. No easy U.S. plant substitute. Stellantis may absorb tariff cost, pass to consumer, or discontinue the nameplate. All outcomes are negative.
Parts pipeline risk
HIGH RISK: If Pacifica production stops, collision repair parts for existing Canadian fleet must be sourced from remaining inventory or aftermarket. No alternative OEM pipeline exists.
Stellantis — Brampton, ON
Dodge Charger / Challenger (final years); retooling for next-gen EV platform · ~100,000 units/yr · ~65% to U.S.
Permanent tariff impact
Retooling for next-gen EV platform. Investment decision directly contingent on tariff outcome. 25% tariff likely cancels EV investment entirely.
Parts pipeline risk
Charger/Challenger parts winding down regardless of trade policy. EV platform cancellation means no new Brampton-built models requiring parts support.
$1.8B investment contingent on CUSMA stability. Super Duty at 25% tariff is uneconomic for U.S. market. Investment cancellation possible — largest single plant risk.
Parts pipeline risk
If Super Duty launch proceeds, creates major new parts demand in Canada. If cancelled, Oakville closes permanently. Binary outcome with major implications either way.
Key Dates & Monitoring Triggers
Decision points, expiry dates, and political windows that drive the tariff scenario matrix. Dates are tracked for escalation signals.
June 30, 2026 — Canada Steel/Aluminum Remission Expiry
Temporary duty relief on U.S. steel and aluminum used in Canadian auto and aerospace manufacturing expires. If not renewed, immediate input cost increase for Canadian parts manufacturers. Body panel, structural component, and fastener costs rise.
July 1, 2026 — CUSMA Free Trade Commission Meeting
Formal review meeting. Each party declares in writing whether to extend CUSMA for another 16 years. Non-extension triggers annual review cycle — no immediate tariff change but investment uncertainty escalates. Greer has indicated unlikely all issues resolved by this date. LeBlanc: "We certainly won't be the source of any delay."
July 24, 2026 — Section 122 Tariff Expiry
The 10% global surcharge (IEEPA replacement) expires by law after 150 days. President cannot extend unilaterally — Congress must act. Administration is using the 150-day window to launch Section 301 investigations as permanent replacement. If Section 301 findings land on time, country-specific rates (potentially 20–40%+) replace the flat 10%. If not, a temporary tariff vacuum is possible for non-232 goods. CUSMA-qualifying goods have been exempt from Section 122 throughout.
Supreme Court ruled 6-3 that IEEPA does not authorize tariffs (Learning Resources v. Trump). 35% IEEPA tariff eliminated. $166B in refunds owed — CBP CAPE portal launched April 20. Section 232 (separate legal basis) unaffected. Trump immediately invoked Section 122 as replacement. Refund processing ongoing but complex — many businesses report refunds being offset against other tariff obligations.
November 3, 2026 — U.S. Midterm Elections
Political window for CUSMA ratification. If Democrats flip one or both chambers, trade policy dynamics shift. Lame-duck session risk. Congressional composition affects whether any negotiated deal can be ratified.
2027+ — Continued Negotiations
U.S. Ambassador Hoekstra described the CUSMA process as "painstaking" — page by page, product by product. Extended uncertainty means OEMs cannot commit to Canadian assembly long-term. Each year without extension increases the probability of investment diversion.
2036 — CUSMA Expiration (if no extension agreed)
Agreement terminates if no extension is negotiated during annual reviews. Full reversion to MFN tariffs. End of preferential auto trade in North America. This is the backstop date — the furthest boundary of the current agreement.