Canadian Prime Minister Mark Carney said his government will allow carmakers to import US-manufactured cars and trucks without tariffs, as long as the companies keep making vehicles in Canada.

The move provides some relief from the trade war to companies including General Motors and Stellantis NV that have assembly plants in Ontario but still export large quantities of vehicles from the US into Canada.

Last week, Carney put retaliatory tariffs of as much as 25 per cent on vehicles made in the US, effectively matching an earlier move by US President Donald Trump on foreign cars. The two countries, along with Mexico, have operated a tightly integrated vehicle supply chain for decades.

Most of the cars and trucks made in Canada are shipped to the US, and US-made vehicles dominate sales at Canadian car dealers.

“Our counter-tariffs won’t apply if they continue to produce, continue to employ, continue to invest in Canada,” Carney told reporters at a news conference. But if a manufacturer cuts production or investment in Canada, the number of tariff-free vehicles it will be permitted to import will be reduced, Canada’s Finance Department said in a news release.

The Carney government’s announcement comes amid increasing concern that carmakers will pull production out of Canada in response to Trump’s tariffs.