The U.S.’s unilateral launch of the largest increase in tariffs in nearly a century has substantially weakened cross-border economic activity between Michigan and Canada, affecting both goods and passengers.
Fewer Vehicles Coming Into Michigan From Canada
Data from the Bureau of Transportation Statistics show that Canadian passenger vehicle entries into Michigan have declined by 12% since February 2025, resulting in 40,000 to 50,000 fewer vehicles entering the U.S. This decline is accompanied by a decrease in tourism activity within the state of Michigan and the U.S. more broadly.
Trucks crossing from Canada into Michigan with goods have also seen a roughly 7% reduction in 2025 compared to 2024, apart from an uptick in March 2025 when importers rushed goods, such as Canadian primary aluminum, across the border to
avoid tariffs.
Passenger Vehicle Exports Plummet, Primarily Due to Drop in Exports to Canada
A disproportionate amount of Michigan’s imports from Canada is tied to the motor vehicle and parts manufacturing industry. Roughly 65-70% of Michigan’s imports from Canada are related to motor vehicles and parts. Similarly, exports to Canada with Michigan as the state of origin are disproportionately skewed toward motor vehicles and parts, accounting for 55-60% of the total.
Cross-border trade has been hampered due to the spike in tariffs for finished motor vehicles, motor vehicle parts, and steel and aluminum products (amongst others). Whereas these tariff rates were zero or near zero in January 2025, they jumped to 18.6% for imported Canadian passenger vehicles (which accounted for 26% of Canadian imports with a destination state of Michigan in 2024). Effective tariff rates for steel and aluminum products were above 40%.
Unfortunately for the state of Michigan, tariffs on motor vehicles have been met with a concomitant decrease in exports. For example, Michigan was the largest source of exported passenger vehicles to Canada in 2024. Through the first half of 2025, passenger vehicle exports from Michigan to all countries were down $597 million (21.5%) compared to the same period last year, with most of this decline driven by a $533-million decrease in passenger vehicle exports to Canada.
With Impact on Motor Vehicle and Parts Plants, Serious Questions Loom on the State’s Manufacturing Health
Moving forward, severe concerns exist about the financial health of the domestic motor vehicle and parts manufacturing sector due to the extensive tariffs. Data from the Quarterly Financial Report prepared by the Census Bureau indicate that manufacturers of motor vehicles and parts in the U.S. had their second-lowest level of operating income relative to sales in the second quarter of 2025, going back 14 years. The COVID-19 lockdown quarter in Q2 2020 was the only quarter with lower profits.
The second quarter of 2024 saw so little profit that profits were just $0.50 for each $1,000 in revenue. Given that roughly 27% of Michigan’s manufacturing employment is concentrated in motor vehicle and parts plants, these low levels of profits raise concerns about the health of Michigan’s manufacturing economy.
Jason Miller is a professor in the Department of Supply Chain Management at Michigan State University.
Editor’s Note: Data provided as of early October 2025 is intended to help understand the impact of tariffs on Michigan’s trade and economy.