Canada’s auto sector is urging the Carney government to remain firm in trade negotiations with the U.S. even if that means no immediate relief from the punishing tariffs on the industry.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada, said the Trump administration miscalculated the response from Canadians and Prime Minister Mark Carney has broad support from voters to turn down a deal.

“If two thirds of the country think you can walk away from these guys, politically, he’s not in the pickle that he might have been a year ago in fighting with the Americans,” he said of Carney.

Canada-U.S. Trade Minister Dominic LeBlanc and Canada’s chief negotiator Janice Charette are in Washington, D.C., this week for the latest series of negotiations with the White House. The two are set to meet with their American counterparts on Tuesday.

There was little movement in talks over the past few months but that changed after U.S. President Donald Trump threatened to impose 50 per cent tariffs on a swath of Canadian goods starting on Aug. 19. Unlike most of the previous rounds of tariffs, there would be no exemption for goods deemed compliant under the Canada-United States-Mexico trade deal, known popularly as CUSMA.

Soon after the announcement last month, Carney said he spoke to the president and the two agreed to ramp up negotiations.

While the CUSMA compliance exemption has shielded most of Canadian exports, the auto industry is one of several exposed to crippling sector-specific tariffs that have been in place for the past year.

Since the spring of 2025, the U.S. has slapped a 25 per cent tariff on imported vehicles. The tariff doesn’t apply to U.S. content in vehicles that are CUSMA compliant. There’s also a 25 per cent tariff on auto parts but that includes a blanket CUSMA compliance exemption.

Canada has responded with matching tariffs, though there are exemptions for manufacturers that are still operating in Canada.

Trump partly justified his latest round of tariffs on Canada’s retaliatory auto measures.

Volpe said while the Americans are trying to get Carney to make concessions by threatening more tariffs, Canadians aren’t swayed and will rally around the prime minister — even if that means more pain for industries like automotive that are heavily dependent on the U.S. market.

“If you put these [tariffs] on with no relief, and we haven’t figured this thing out, Canadians are not going to be demanding that we acquiesce to American demands. The Canadians are going to be demanding that the prime minister absolutely put his foot down, and no, we don’t want to make a deal,” said Volpe.

“It doesn’t work for automotive, but I have a couple of hats in my closet. One of them is automotive, and the other one is my Canada hat, and I can understand that.”

Volpe praised Canada’s negotiating team for remaining “disciplined” in talks with the Americans and refusing to settle for a piecemeal agreement.

Referencing the Godfather books and movies, he said Canada has “gone to the mattresses” and is prepared for protracted negotiations with the Americans, though ultimately, the auto sector will likely face new barriers to enter the U.S. market.

“They know what we’re looking for, which is to restore access without tariffs, but also no one is fooled. There’s going to be a price, higher price to market entry. But there are other ways to do that,” Volpe said, offering up higher regional value content as a possible solution.

This was one of the major changes made in CUSMA, which was negotiated during Trump’s first term.

Under the previous trade deal, vehicles had to have at least 62.5 per cent regional value content to avoid tariffs. That number is now 75 per cent.

Increasing the content rate would mean that a greater percentage of a vehicle’s parts would have to be sourced from North America to qualify for tariff-free treatment.

Volpe said he’s encouraged by recent comments from U.S. Trade Representative Jamieson Greer calling for for great vigilance against Chinese involvement in the North American auto sector and acknowledging the impact of the tariffs on U.S. automakers, who source parts from across the continent.

He said Trump’s pivot on auto parts shows the White House is sensitive to concerns from American automakers. The initial tariffs included no CUSMA exemption but were revised by Trump after outcry from the industry.

“We got an exception for CUSMA compliant auto parts last year from the Section 232 tariffs. I did not ask Canada for any help on that at all. We don’t need to trade anything for it,” Volpe said.

“[The auto parts tariffs were] going to shut down the sector within a week. We did the hustle, we did the advocacy, we did the math, we put it in everybody’s hands, and then dared them to screw themselves, and they didn’t.”

Volpe said the “principles of that deal” could offer a path forward for a broad agreement on the auto sector and he’s heard discussions around a similar exemption process in the latest round of talks.

While Canada’s auto sector can’t replace the U.S. with another market, Volpe said Canada’s massive increase in defence spending could help blunt the impact of the tariffs.

He explained that contracts for military vehicle production would total around $4 to $5 billion, whereas one of the country’s top production plants makes around $10 to $12 billion worth of cars each year. But while commercial vehicles are never returned to plant once they leave the assembly line, Volpe said military vehicle contracts include a “maintenance, repair, and overhaul commitment.”

“You make a logistics vehicle for the Canadian Armed Forces, you’re married to that vehicle for 20 years. So, there’s other work, and that work can help keep plants open, and that work can help strengthen balance sheets and to live to fight another day.”

READ MORE: Canada-U.S. trade talks gain momentum as both sides signal room for concessions

As iPolitics reported over the weekend, Canada-U.S. trade negotiations are showing renewed momentum, with both sides increasingly focused on potential concessions and tariff changes.

Canadian industry sources familiar with the discussions said the change in tone has come as both sides acknowledge that reaching an agreement will require movement from each country. Discussions are now focusing on what concessions or changes could help resolve the dispute rather than which side is responsible for creating it.

One potential area of movement involves Canada’s supply management system.

While supply management has long been a source of friction between Canada and the United States, industry sources now say that American negotiators are not currently demanding that Canada dismantle the system.

Instead, the U.S. is seeking changes to the way Canada allocates tariff-rate quotas for American dairy products, essentially the process that sees who is allowed to import certain quantities of U.S. dairy products into Canada at lower tariff rates.

That distinction could provide negotiators with more room to reach a compromise.

Changing the allocation process would be significantly narrower than reopening Canada’s broader supply management system, which protects Canadian dairy, poultry and egg producers through production controls, regulated prices and restrictions on imports.

Canada’s supply management system, which covers dairy, poultry and eggs, controls domestic production, sets prices and limits foreign competition through tariff-rate quotas, or TRQs. Imports are permitted up to specified levels at low or zero tariffs, while products entering above those thresholds can face steep duties.

Canada agreed under CUSMA to give U.S. dairy producers tariff-free access to 3.9 per cent of the Canadian dairy market. But the way Ottawa distributes that access has become a constant source of friction between the two countries.

The U.S. has argued that American producers aren’t able to take full advantage of the access Canada promised. U.S. figures have shown that, on average, only 42 per cent of the 14 dairy TRQs created under CUSMA were being filled, with nine categories below 50 per cent.

On the other hand, Canadian importers have also raised concerns about the system, arguing that much of the quota has historically gone to major Canadian dairy processors rather than importers, distributors and retailers that would have a greater incentive to bring competing American products into the country.

Another possible area of movement is Canada’s restrictions on American alcohol.

A source familiar with the Quebec government’s position said there is some flexibility around the province’s ban on U.S. liquor, but that Quebec would need Carney to provide direction before making a change.

The liquor restrictions have been among the most visible retaliatory measures adopted in Canada amid the trade dispute, with provinces using their control over alcohol distribution to pull or restrict U.S. products.

Any coordinated reversal could therefore become part of a broader effort to reduce trade tensions if Ottawa and Washington move closer to an agreement.

The federal government would not discuss the substance of the negotiations.

“As detailed trade discussions between our two countries are ongoing, we will not comment on specifics,” Gabriel Brunet, a spokesperson for LeBlanc, said in a statement.

“Canada’s objective remains to reach a comprehensive deal that addresses sectoral tariffs and benefits Canadian workers, farmers and businesses.”