A leading transit advocacy group warns that new U.S. tariffs on buses taking effect this weekend could destabilize municipal budgets across North America and eventually hit taxpayers, commuters, and city services.
What’s Changing
Under a presidential proclamation issued October 17, 2025, the United States will apply:
- 10% ad valorem duty on buses (HTSUS 8702), and
- 25% ad valorem duty on medium- and heavy-duty vehicles (MHDVs) and specified parts (MHDVPs).
Tariffs take effect 12:01 a.m. EDT, November 1, 2025, and are in addition to existing duties/fees until reduced or terminated.
Why the Administration Says It’s Needed
Following a Section 232 investigation, the U.S. Commerce Secretary concluded that imports of MHDVs, key parts, and buses threaten national security due to:
- Their critical role in defense logistics and emergency response,
- High and rising import penetration (~43% for Class 4–8, ~50% for Class 8),
- U.S. dependence on foreign suppliers for engines, batteries, castings/forgings, and other parts,
- Significant overlap between truck and bus supply chains.
The stated policy goal is to stabilize U.S.-produced MHDV market share near ~80%, strengthen supply chains, and bolster domestic capacity and jobs.
Content Rules and Offsets (Key Mechanics)
- USMCA content relief (vehicles, not buses): For qualifying MHDVs, documented U.S. content can be excluded; the 25% applies only to non-U.S. content. Misstatements trigger the full 25% on the entire vehicle value for that model until compliance is verified.
- Parts treatment: A similar non-U.S.-content method for individual parts will apply after Commerce sets a process. Knock-down kits remain fully subject to extra duty.
- Offsets (2025–2030): To temper costs on parts equal to 15% of vehicle value, manufacturers assembling MHDVs in the U.S. can receive a 3.75% import adjustment offset (also extended to MHDV engine makers). Not available for knock-down kits; Commerce may limit/suspend if inconsistent with security objectives.
- Administration: Commerce may add more parts to scope; foreign-trade zones must use privileged foreign status; “stacking” aligns with earlier auto rules. Exemption for vehicles/buses 25+ years old. Limited steel/aluminum relief (not below 25%) tied to USMCA-qualified inputs and added U.S. capacity.
Cities Bracing for Higher Costs
Josipa Petrunic, CEO of the Canadian Urban Transit Research & Innovation Consortium (CUTRIC), says the tariffs will raise prices on buses and critical components in a highly integrated North American supply chain where assemblies cross the border multiple times:
“Overnight, every bus that was already in the procurement pipeline — even those under signed contracts — just became up to 10 per cent more expensive.”
With no carve-outs for trade agreements or Buy America, she expects immediate pressure on city procurement, potential delivery delays, and shrinking production runs:
- Hybrid bus: ~$900,000
- Electric bus: up to $1.3 million
Fewer units will fit within fixed capital budgets.
Ripple Effects on Local Budgets
Municipalities may look to property taxes, transit fares, parking fees, and congestion charges to offset higher costs.
Rebecca Bligh, president of the Federation of Canadian Municipalities (FCM):
“Higher costs mean fewer new buses, slower progress toward cleaner fleets, and the risk of service cuts or fare hikes… this adds pressure at a time when reliable, accessible transit is more important than ever.”
Canada’s bus sector employs 25,000+ workers and has already been strained by prior steel and aluminum tariffs.
Manufacturers Reviewing Impact
North America’s major bus makers:
- New Flyer (NFI Group) — Winnipeg HQ, large Canadian market share
- Nova Bus — Saint-Eustache, Quebec
- Gillig — East Bay, California
New Flyer says it is reviewing the details and implications of the new policy.
Policy Analysis & Commentary
On the policy rationale. The administration frames the tariffs as national-security measures to rebuild domestic capacity. Critics counter that broad import duties function as consumption taxes borne by end users, raising costs for cities and riders. Because the proclamation’s relief mechanisms exclude buses from the non-U.S.-content calculation and require new administrative processes for parts, near-term frictions are likely even if longer-term offsets materialize.
On reciprocity and price controls. A common critique is that “Buy American” rules, minimum-content thresholds, and tariff walls resemble price-control mechanisms that can distort markets, complicate cross-border supply chains, and reduce quality/choice. Proponents argue such measures counter foreign industrial policy; opponents note that mandates on inputs and origin can entrench inefficiencies and ultimately raise prices for taxpayers and consumers.
On Canada’s position. Separate from U.S. policy, Canada faces structural cost pressures—including labor, regulatory complexity, and the capital intensity of low-emission fleets. If Canadian policy further raises operating costs while U.S. tariffs raise procurement costs, transit agencies could face a double squeeze: higher unit prices and tighter operating budgets, risking slower fleet renewal and service trade-offs.
What to Watch Next
- Implementation guidance from U.S. agencies (Commerce, CBP) on content calculations for parts and the offset programs.
- Municipal procurement responses: renegotiations, deferrals, or specification changes to stretch budgets.
- Price pass-throughs: fare adjustments, taxes/fees, or congestion pricing proposals to cover capital gaps.
- Trade diplomacy: whether Ottawa secures accommodations for buses or parts within broader talks.
- Market effects: order-book changes for New Flyer, Nova Bus, and Gillig; battery, drivetrain, and component suppliers’ pricing and lead times.
Opinion note: In our view, broad tariff regimes risk taxing residents and riders while entangling agencies in complex compliance—policies that can look less like market discipline and more like administrative price management. Good transit policy should prioritize cost-effective fleet renewal, predictable capital planning, and clear, time-bound industrial supports to avoid permanent cost inflation.
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