Why Trump's Canada Tariff Destroyed American Car Plants

By The Decision Room

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Trump wanted to punish Canada for taxing American cars. So last week, he signed a 50% tariff on the auto industry, using a law from 1930 nobody had touched in 96 years. There's just one problem: a modern car doesn't have a nationality. The vehicle Trump just taxed crosses the Canada-US border, on average, 7-8 times before it's even finished being built. An engine block gets cast in Ontario, machined in Michigan, shipped back to Ontario for assembly into a transmission, then sent south again to be bolted into a truck in Ohio — an ordinary Tuesday in North American auto manufacturing since the original Auto Pact of 1965. Section 338, unlike every other tariff in this trade war, explicitly denies CUSMA compliance any relief — and trade lawyers are still debating whether the tax applies once per finished vehicle, or compounds at every single crossing. Canada's own 25% tariff on American vehicles — one of Trump's three official reasons for this escalation — was itself Ottawa's response to

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