Trump’s 25% tariffs are an existential threat to Canada’s auto industry

DETROIT – There is growing concern about the president-elect Donald Trumpplan to apply 25% rates Canadian imports will be an existential threat to the country’s renewable auto industry.

Potential tariffs on vehicles and auto parts are particularly worrisome for Ontario, the center of Canada’s auto industry. Five car manufacturers – Ford Motor, General Motors, Star, Toyota Motor and Honda Motors — produced 1.54 million light vehicles in the state last year, mostly for U.S. consumers.

“It would be terrible. It would destroy not only Canadian jobs, but American jobs,” Ontario Premier Doug Ford told CNBC in a phone interview.

A tariff is a tax on imported or foreign goods brought into the United States. They are paid for by companies, which some fear could be passed on to consumers.

Ford, who said he had not spoken directly with Trump, argued that any tariffs would be harmful to both sides of the border.

According to him, raw materials and parts regularly cross the border multiple times before being used in the final assembly of the vehicle. Tariffs, he warned, would raise prices, which could slow production and eliminate jobs.

“We have a trade agreement now. Things are working,” Ford said. “I’ve made it clear: I’d like to have a bilateral trade agreement with the United States, and Mexico wants a trade agreement, we’ll do a bilateral trade agreement with Mexico. But Mexico, if they want to sit at the table, they have to follow the rules.”

Trump will impose an additional 10% tariff on goods from China and a 25% tax for Canada and Mexicoalthough he offered a few details as to how there might be exceptions. He said illegal immigration and illegal drug trafficking caused concerns at the border and justified the tariffs, saying he planned to invoke “national security” concerns to impose such increases rather than seeking congressional approval.

Tariffs on components could add $600 to $2,500 per car to parts from Mexico, Canada and China, according to estimates in a Wells Fargo analyst note. Cars assembled in Mexico and Canada, which account for about 23% of the cars sold in the U.S., could increase prices by $1,750 to $10,000.

Such tariffs and rising costs will cause problems for Canadian Prime Minister Justin Trudeau. prevents calls for his resignation.

Ontario recently launched a multimillion-dollar advertising campaign to promote its role as a major trading partner in the United States. “Northern Ally”.

According to Prime Minister Ford, Ontario as a province is the third largest trading partner for the United States, including the top foreign trading partner for 17 states. He notes that trade between Ontario, as well as between Canada and the United States, is more evenly split than with Mexico, especially when it comes to extracting the oil that Canada sends to the United States.

Canada’s auto parts exports will be $23.5 billion in 2023, and light vehicle exports will be $53.5 billion. According to Canada, imports amounted to 47.5 billion and 70.4 billion dollars, respectively. DesRosiers Automotive Consultants. Of these, the United States accounts for 95.3% of Canada’s total auto exports and 57.7% of total auto imports..

“Anything that upsets that balance will affect both sides of the border,” said Flavio Volpe, head of the Canadian Automotive Parts Manufacturers Association. “The best tariff level for Canadian and American auto parts suppliers is zero.”

Volpe argues that a double-digit tariff would have “a ripple effect” on the US auto industry. As an example, he pointed to 2022, when Canadian truck drivers shut down the Ambassador Bridge between the Canadian cities of Detroit and Windsor, Ontario – the busiest border bridge between the countries – disrupts production For several car manufacturers in the US

Toyota is the top automaker in Canada with about 526,000 units in 2023, followed by Honda with about 378,500 vehicles. GM, once a Canadian manufacturer of more than 1 million vehicles, is now one of the smallest light truck manufacturers in the region.

“The industry, like the American industry, has struggled to recover from the pandemic. We’re still not there in terms of sales and production, but we’re recovering,” he said. Canada’s global automakersit represents the interests of 16 non-US automakers.

The increase comes despite Ontario’s two major assembly plants, owned by Ford and Stellantis, being in limbo because the factories currently have no cars to build. Thousands of workers were laid off due to lack of production.

Much of the uncertainty has been related to the auto industry’s transition to fully electric vehicles. Adoption of EVs It didn’t happen as quickly as expected. Trump has also promised to eliminate subsidies for buying EVs, which help boost sales while federal benefits are available.

“There is deep concern about the Canadian auto industry because it is not clear which direction to go,” said Charlotte Yates, president of the Center for Automotive Policy Research and professor emeritus at McMaster University. “There are a number of public policy changes, as well as political attitudinal changes, and of course the threat of tariffs that really shakes up the industry in Canada.”

Ford, Ontario’s premier, said the United States and Canada must work together as they have for decades.

“We need to focus on China and Mexico, not his closest ally around the world,” Ford said. “Let’s build a fortress, an American-Canadian fortress against the rest of the world. If we stick together, we can’t be stopped.”