When Paccar Inc., a maker of commercial trucks, sold bonds in February, it paid about 0.1 percentage point more than its existing bonds, a concession that reflected tariff risk, Duvick said. That’s a surprising twist for a company with a relatively healthy balance sheet that would normally not pay anything extra, he said.

Earlier last month, GM Financial was hit in the Canadian corporate debt market too. The company had to boost spreads on a bond it was selling to bring yields above its existing notes. That’s a rarity in the Canadian dollar market now, where investors’ strong demand has pushed yields on new bonds to lower levels than existing securities.

U.S. President Donald Trump has promised 25 percent tariffs on most Canadian goods imported to the U.S. starting tomorrow, and 25 percent tariffs on automobiles by early April. Canada has pledged to retaliate. A trade war could reduce Canadian output by 2.5 percent in two years and wipe out growth, according to the Bank of Canada. Stellantis NV, the maker of Chrysler cars, has already paused work at its assembly plant in Ontario, which employs about 3,000 workers.

Automakers would be among the hardest-hit companies, given how freely goods currently travel across U.S., Canadian, and Mexican borders during manufacturing. Car manufacturers may have to absorb rather than pass along some of the costs, CreditSights’s Duvick said.

Automaking is a competitive industry. Tariffs could boost US car prices by as much as $12,000, according to a study by automotive consulting firm Anderson Economic Group. Consumers can only absorb so much of the added cost burden: The price of new cars and trucks has risen more than 20% since 2019.

“If we have material tariff concerns, in the credit markets Canadian autos are where you are going to see that concern expressed first,” said Adrienne Young, director of Canadian corporate credit research for Franklin Templeton Fixed Income.

The trade wars that are gearing up now could have a global impact on credit markets. Some European businesses in threatened industries have been accelerating borrowing plans to get ahead of any punitive measures.

U.S. bonds from carmakers could also broadly get hit. Manuel Hayes, a senior portfolio manager at Insight Investment, is watching to see whether at least some automakers have their bonds cut to junk status. If there are such downgrades and many money managers are forced to sell their holdings, he’ll consider buying the so-called “fallen angels.” When the companies are ultimately upgraded back to high-grade, bond prices may surge.

“At the end of the day, these are still very large corporations, they’re very important to the U.S. economy,” he said. “It’s just that there’s some short-term volatility on the horizon.”

Despite the turmoil that tariffs could unleash, credit spreads are generally tight in Canada and the U.S. “What we haven’t seen, in our view, is reflection of the recession and the potential implication of a trade war in these credit prices,” said Richard Pilosof, CEO of Toronto-based asset manager RP Investment Advisors.

In Canada, that overall strength is supported by strong demand and limited supply. On the demand side, the Bank of Canada’s cuts to overnight interest rates are pushing money into longer-term securities and out of shorter-term instruments, driving demand for corporate bonds, Pilosof said.

Tariff threats will likely hasten the pace of rate cuts, bolstering flows into fixed income, said Benjamin Jang, a portfolio manager at Vancouver-based asset management firm Nicola Wealth Management Ltd.

On the supply side, global issuers are favoring cheaper U.S. and European markets over Canada, and even Canadian banks have leaned toward U.S.-dollar issuances for bail-in bonds, Jang said.

Beyond supply and demand fundamentals, Canadian credit spreads are often less sensitive to market signals, Pilosof said. Retail investors in Canada tend to hold bonds to maturity. “They’re not looking at any change in the composition of the economy or industry,” he said.

In the United States, supply has similarly been relatively light. Net sales of investment-grade corporate bonds are down more than 20 percent for 2025 through Tuesday, compared with the same period last year, according to data compiled by Bloomberg.

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