A 15% tariff on automobiles would wipe out profitability across the sector and speed the industry's decline, experts told The Globe and Mail.

The warning lands as automakers and parts suppliers already operate on thin margins. Analysts who spoke with the paper framed the proposed duty level not as a manageable cost increase but as an existential one: at 15%, tariffs would consume the profit that OEMs and their supply chains earn on affected vehicles and components.

The mathematics behind the claim is straightforward. Mass-market automakers typically earn single-digit operating margins. A 15% duty applied to vehicles or parts crossing a border — costs that manufacturers cannot fully pass on to consumers in competitive segments — would push those margins negative for many programs.

The experts went beyond the immediate margin arithmetic. Sustained losses of that scale, they argued, would trigger the industry's decline: reduced investment in plants, delayed product programs, and eventual capacity withdrawals from markets where the tariff burden makes production uneconomic.

For the supplier base, the exposure is arguably worse than for the OEMs. Tier 1 and Tier 2 suppliers operate with even less cushion and less pricing power. A tariff regime that erases OEM profitability flows directly down the chain through price-reduction demands and volume cuts.

The Globe and Mail report reflects the Canadian context of the debate. Canada's auto sector is built on cross-border production networks, with vehicles and parts moving between Canadian, U.S. and Mexican plants multiple times before final assembly. Tariffs at that level would tax those intermediate flows repeatedly, compounding the cost at each border crossing.

Industry analysts have made similar arguments in previous rounds of tariff threats: estimates produced during earlier U.S. tariff proposals in 2017-2019 put potential Canadian production losses in the hundreds of thousands of units. The 15% figure now under discussion sits in the range that those earlier assessments identified as the threshold where plant economics break down rather than simply tighten.

What distinguishes the experts' framing is the word "erase." Their position is not that a 15% tariff would trim profits or compress margins at the edges. It is that the duty would remove profitability altogether for significant portions of the industry, converting viable operations into loss-making ones.

The "decline" warning carries specific weight for Canada's assembly footprint. Plants in Ontario — among them facilities operated by Honda, Toyota, Ford and GM — depend on tariff-free access to the U.S. market under the current trade framework. Any tariff that permanently erodes the cost position of those plants raises the risk that future product allocations go elsewhere.

What to watch next: whether the 15% tariff proposal moves from discussion to formal policy, how OEMs respond in their next rounds of production allocation decisions, and whether Canadian and U.S. negotiators treat the auto sector as a carve-out in any broader trade arrangement.