By Paul Vieira

OTTAWA--Canada will pause its electric-vehicle sales mandate that was set to take effect next year to ease the financial squeeze the domestic auto sector faces from hefty Trump administration tariffs.

Prime Minister Mark Carney added Friday that officials would review the EV sales policy, implemented by his predecessor Justin Trudeau, alongside a broader review of how the Canadian economy can remain competitive while reducing greenhouse gases.

The pause comes as a relief for the domestic auto industry, which repeatedly warned of production shutdowns and job losses in the event Ottawa followed through with rules compelling 20% of all new car sales in 2026 to be in the EV category. The goal was that EVs had to represent all new car sales, starting in 2035. The most recent data from Statistics Canada, covering the first quarter of 2025, indicate that zero-emission vehicles represented about 9% of total new sales, a 23% drop from the comparable year-ago period, as governments scaled back rebates to encourage EV purchases.

EV sales in the U.S. are expected to wane in the coming months once a U.S. tax credit expires later this month. Several automakers in the U.S. are already taking steps to get ahead of that decline, laying off workers and cutting production of electric models. In May, Honda Motor said it was postponing by about two years an $11 billion EV-manufacturing project in Canada, citing weaker-than-expected sales.

Carney said waiving the EV-sales mandate for 2026 is appropriate as the domestic auto sector is under "extreme pressure" because of President Trump's trade policy, including tariffs on auto imports to compel car makers to relocate operations from abroad to the U.S. Vehicles assembled in Canada face a 25% tariff from the U.S. About 90% of all Canadian auto exports are U.S. bound, and trade data this week indicated that shipments abroad of Canadian-made passenger vehicles and light trucks are down 25% following a peak in March.

"We're at the start of a restructuring in the Canadian auto sector, and the suspension of the EV mandate for 2026 is part of helping with that," he told reporters at a suburban Toronto factory. He added the Canadian auto sector is under "extreme pressure."

Carney said officials would conduct a 60-day review of the existing federal EV standards policy to explore ways to reduce costs, and possibly introduce new options to bring more affordable EVs to Canada. He skirted a question from reporters about whether that contemplated easing 100% tariffs on Chinese-made EV vehicles.

Besides suspending the EV sales-mandate policy, Carney said companies in the auto sector would gain access to a $3.6 billion fund to help companies retool and adapt amid a protectionist U.S. trade policy.

Brian Kingston, president of the Canadian Manufacturers' Association, said the EV sales pause was an important step and looked forward to working with federal officials on the policy review.

"The EV mandate imposes unsustainable costs on auto manufacturers, putting at risk Canadian jobs and investment in this critical sector of the economy," he said, adding his members are still pushing for a full repeal of the sales regulation.

The Canadian Auto Dealers Association said it would push government officials to consider changes to the EV standards policy that reflects differences across the country in consumer demand, as zero-emission vehicles are less attractive in remote and rural parts of the country; and the current shortage of EV-charging stations across Canada, as outlined in recent studies produced for the Canadian government.

Officials from Ottawa and Washington are in talks on resolving their tariff row, with Canada focusing on relief for sectors such as autos that face hefty tariffs.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

September 05, 2025 13:09 ET (17:09 GMT)

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