As Washington and Ottawa impose tariffs on each other’s products, China is moving in the opposite direction — building scale, driving down costs and aggressively pursuing the global customers Detroit needs.
DETROIT — The United States and Canada are now engaged in an escalating trade war that threatens to make North America’s deeply integrated automotive manufacturing system more expensive and less competitive.
China could be one of the biggest beneficiaries.
Canada has announced retaliatory tariffs of 15%, 25% and 50% on C$27.6 billion worth of U.S. imports, matching the latest American tariffs dollar for dollar and rate for rate. The Canadian counter-tariffs take effect Sept. 8 and target sectors including steel and aluminum, dairy products, appliances, agricultural equipment, pulp and paper, plastics and electronics.
Existing Canadian retaliatory tariffs on U.S. automobiles also remain in place.
President Donald Trump has threatened an even more consequential escalation: raising U.S. tariffs on Canadian cars, trucks, automotive parts and steel to 50% beginning Jan. 1, 2027.
For Michigan, the danger goes beyond the immediate prospect of higher costs and lost jobs examined by MITechNews Thursday.
The bigger question is whether the United States and Canada are weakening their own automotive manufacturing system just as China is becoming Detroit’s most formidable global competitor.
Glenn Stevens Jr., executive director of MichAuto and chief automotive officer for the Detroit Regional Chamber, told MITechNews that China could emerge as a major beneficiary of continuing North American trade tensions.
Stevens said tariffs and trade uncertainty create additional costs and distractions for U.S. automakers at precisely the time they need to concentrate resources and management attention on competing globally.
Rather than pulling apart the U.S.-Canada manufacturing relationship, Stevens argues North America should strengthen the USMCA partnership.
A major new study from Ann Arbor’s Center for Automotive Research shows why.
China Is No Longer An Emerging Auto Competitor
CAR’s new white paper, China’s Automotive Surge: The Six ‘S’ Framework Underpinning China’s Global Competitiveness, documents an extraordinary transformation.
China is now the world’s largest automotive market, producer and exporter.
Chinese automakers increased their share of the global automotive market from 14% in 2020 to 25% in 2025.
Over those same five years, total sales by Chinese automakers increased 101%.
Sales by all other global automakers combined grew just 7%.
CAR identifies six forces behind China’s rise: industrial strategy, deeply developed supply chains, speed in developing vehicles, excess manufacturing capacity, subsidies and rapidly expanding sales.
Those advantages reinforce one another.
China produced approximately 68% of the world’s electric-vehicle batteries in 2025, giving its automakers access to a domestic battery ecosystem of a scale few competitors can match.
Chinese new-energy vehicle exports increased 211% from the first quarter of 2024 through the first quarter of 2026.
For Detroit, those aren’t abstract statistics.
They represent competitors chasing many of the same customers Ford, General Motors and Stellantis need outside the United States.
Chinese Cars Don’t Have To Reach Detroit To Hurt Detroit
The American market remains largely closed to Chinese-built vehicles because of steep tariffs and other trade barriers.
But Ford, GM and Stellantis compete globally.
Chinese manufacturers increasingly challenge them in Europe, Latin America, Asia, Africa, the Middle East and other markets.
China’s automakers therefore don’t have to sell vehicles in Michigan to take business away from Michigan’s auto industry.
Mexico provides perhaps the most important warning.
Chinese automakers increased their Mexican market share from less than 1% in 2020 to 14.5% in 2025, according to CAR.
Mexico isn’t simply another foreign market.
It is the third member of USMCA.
Chinese manufacturers also are expanding aggressively elsewhere, challenging established global manufacturers on price, technology and increasingly vehicle quality.
China’s slowing domestic market may actually intensify that international push as manufacturers look overseas to keep factories operating and capture new customers.
China Has 15 Million Vehicles Of Excess Capacity
CAR identifies market saturation as another force reshaping China’s automotive industry.
China has built more vehicle-manufacturing capacity than its domestic consumers can absorb.
CAR estimates the country had approximately 15 million vehicles of excess manufacturing capacity in 2025.
That creates enormous pressure to export.
Factories need production. Suppliers need orders. Workers need jobs.
So Chinese manufacturers increasingly are turning toward international markets.
Ford, GM and Stellantis therefore aren’t merely competing against individual Chinese companies.
They are competing against an enormous automotive ecosystem with massive manufacturing scale, extensive battery production, developed supply chains and substantial government support.
Meanwhile, The U.S. And Canada Tax Each Other
The contrast with North America is becoming increasingly stark.
The United States imposed 50% tariffs Aug. 22 on C$27.6 billion worth of Canadian products under Section 338 of the Tariff Act of 1930.
Canada has now answered.
Beginning Sept. 8, Canada will impose tariffs ranging from 15% to 50% on C$27.6 billion worth of American imports, with individual rates designed to match corresponding U.S. tariffs.
Canada’s government says the new tariffs will concentrate on sectors including steel and aluminum, dairy, appliances, agricultural equipment, pulp and paper, plastics and electronics.
Existing Canadian auto counter-tariffs also remain in place.
The economic conflict could become considerably more serious Jan. 1 if Trump follows through on his threatened 50% tariffs on Canadian cars, trucks and automotive parts.
Patrick Anderson, CEO of East Lansing-based Anderson Economic Group, told MITechNews Thursday that tariffs at that level would be an “absolute body blow” to the automotive industry on both sides of the border.
“It would mean plants closing, and many job losses in Michigan, Ontario, Ohio, Indiana, and Wisconsin,” Anderson said.
Anderson called Michigan “the most vulnerable state to a US-Canadian trade war.”
“We will get hit coming and going,” he said, citing Michigan agricultural exports, auto-parts exports and Canadian components used in Michigan assembly plants.
The comparison with China is difficult to ignore.
China is trying to make its automotive system bigger, faster and cheaper.
The United States and Canada are making their trading relationship more expensive and unpredictable.
Canada Says Its Auto Industry Is Non-Negotiable
There is still time to prevent the biggest automotive escalation.
Canada’s ambassador to Washington, Mark Wiseman, said Thursday that Ottawa remains willing to negotiate but will not accept an agreement that sacrifices Canada’s auto assembly and parts industry.
Canada considers preservation of that manufacturing base critical to Ontario and Quebec.
The position underscores the difficulty facing negotiators.
Trump’s strategy is designed in part to encourage companies to shift Canadian manufacturing into the United States.
Canada considers preserving those factories and jobs a fundamental national economic interest.
That leaves the Michigan-Ontario automotive system caught between competing national objectives.
Canada Is Part Of Detroit’s Supply Chain
The distinction between Canada and China is fundamental.
China is a global automotive competitor.
Canada is deeply embedded in Detroit’s manufacturing system.
General Motors builds Chevrolet Silverado pickups in Oshawa. Stellantis builds Chrysler Pacificas in Windsor. Ford is preparing Oakville to produce F-Series Super Duty trucks.
Canadian factories also manufacture engines and thousands of components used in vehicles assembled in the United States.
The automotive supply chain doesn’t stop cleanly at the Detroit River.
That is why Stevens believes strengthening USMCA is strategically more important than creating additional barriers between the United States and Canada.
The real challenge, in his view, is making North America more competitive against the rest of the world.
Trump’s Bet: Tariffs Bring Factories Home
Trump argues that tariffs solve that problem by giving companies a powerful incentive to manufacture in America.
“Build in the U.S. and there are ZERO TARIFFS,” Trump said when announcing his latest Canadian auto-tariff threat.
At 50%, the incentive could be enormous.
Companies deciding where to locate future factories could conclude that building in Michigan, Ohio or another U.S. state eliminates substantial tariff exposure.
If that happens, Trump’s strategy could generate additional American investment and manufacturing jobs.
But relocating existing automotive production is much more difficult.
Assembly plants cost billions of dollars. They depend upon supplier networks, logistics systems and skilled workers developed over decades.
Moving that production takes years.
And China isn’t waiting.
Tariffs Could Become A Michigan Midterm Issue
The escalating trade fight also could become an issue in Michigan’s Nov. 3 midterm elections, particularly in the state’s closely watched U.S. Senate race.
Republican nominee Mike Rogers has aligned himself closely with Trump and has previously defended tariffs as a tool for protecting American manufacturing. Rogers also has described Chinese automobiles as a serious threat to the U.S. auto industry — creating an important policy question as Michigan manufacturers confront both the Canada trade dispute and growing Chinese competition overseas.
MITechNews asked the Rogers campaign whether he supports Trump’s threatened 50% tariffs on Canadian cars, trucks and automotive parts. MITechNews also asked whether Rogers believes imposing those tariffs would strengthen or weaken the ability of U.S. automakers to compete against China’s rapidly expanding auto industry.
The Rogers campaign did not respond before publication.
Democratic nominee Abdul El-Sayed has sought to make Trump’s tariff policies an issue in the Senate campaign, arguing that Michigan consumers and businesses ultimately bear the costs.
That gives Democrats an opening to connect the trade dispute to vehicle prices, manufacturing employment and the broader affordability debate.
The political consequences remain uncertain.
But in Michigan — where the auto industry depends heavily on cross-border trade with Canada — the economic consequences of the tariff fight could become increasingly difficult for either party to avoid as Election Day approaches.
CAR Says North America Must Get More Competitive
CAR isn’t arguing that North America should duplicate China’s industrial system.
Its research instead seeks to understand why Chinese manufacturers have become so competitive and what North American companies and policymakers can learn from their rise.
CAR President and CEO Elizabeth Krear said China’s automotive strength didn’t result from a single policy or technological breakthrough.
It developed over decades as industrial strategy, supply chains, scale, technology and speed reinforced one another.
The implications for North America extend beyond vehicle sales to manufacturing strategy, investment, technology development and public policy.
The objective should be strengthening North America’s automotive ecosystem.
That’s where the U.S.-Canada trade war becomes a strategic issue for Michigan rather than simply another tariff dispute.
Who Wins If North America Becomes More Expensive?
China doesn’t directly benefit every time Washington imposes a tariff on Canada or Ottawa taxes an American product.
But global competition is relative.
If tariffs increase Ford, GM and Stellantis production costs, disrupt suppliers, delay investment or consume management attention, competitors gain an opening.
Stevens sees that uncertainty itself as a problem.
Detroit’s automakers already face enormous challenges: electrification, software-defined vehicles, artificial intelligence, autonomous driving and rapidly changing consumer markets.
China adds perhaps the largest competitive challenge of all.
Its automakers are developing vehicles faster, producing batteries at enormous scale and increasingly competing on both technology and price.
North America has formidable advantages of its own — engineering talent, manufacturing expertise, capital, universities and a century-old automotive supply base concentrated heavily in Michigan.
But maximizing those advantages requires an efficient North American production system.
The Bigger Competition Isn’t Michigan Versus Ontario
Thursday, MITechNews examined Anderson’s warning that Michigan could suffer more than any other state from an escalating U.S.-Canada trade war.
Since then, the battle lines have become clearer.
Canada has published its counter-tariffs.
Trump is threatening another escalation Jan. 1.
And Ottawa says preservation of its automotive manufacturing industry is essential to any future agreement.
The question for Detroit is therefore bigger than who wins a tariff battle between Washington and Ottawa.
Who does Detroit really need to beat?
Ontario factories aren’t trying to replace Ford, GM and Stellantis in global markets. Many of them build vehicles and components for those companies.
Chinese automakers are competing for those customers.
Trump is betting tariffs will bring more manufacturing into the United States.
Anderson warns they could instead close factories.
Stevens argues North America needs a stronger partnership while Detroit concentrates on competing globally.
CAR’s research shows just how quickly China is advancing.
If tariffs make North American vehicles more expensive while Chinese manufacturers continue driving down costs and expanding around the world, the irony would be enormous.
A trade war intended to make America’s auto industry stronger could make its most formidable global competitor stronger by comparison.
And the biggest winner could be China.
