Published On: Sat, Jun 23rd, 2018

Canadian Auto Industry Under Threat from Trump Tariffs

It looks as though it could be interesting times ahead for the Canadian auto industry as President Donald Trump looks set to carry through on his threat to impose a 24 percent tariff on auto imports from its neighbor Canada.

photo/ Mary Pahlke via pixabay

President Trump has already requested that the US Commerce Department review whether or not vehicle imports pose a threat to US national security. If considered so, it would mean adding to tariffs already imposed on aluminum and steel. The car levies would apply to all countries, including the US’s NAFTA partners Canada and Mexico, the two largest exporters of vehicles to the US.

The Canadian Car Industry represent Canada’s largest export after energy products. Motor vehicles and parts constitute approximately 16 percent of the $5.7 billion in exports over the first four months of 2018. The entire Canadian auto industry which includes car rentals Toronto and in other cities directly employs approximately 130,000 people and is believed to contribute somewhere in the region of $20 billion Canadian dollars to the country’s GDP.

Despite the fact that the Canadian economy is growing at a 2.2 percent rate, should the Trump tariffs be implemented it is estimated that it could wipe off around 0.6 percent from Canadian growth FCA, GM, Toyota Motor Corp. Ford, and Honda Motor Co. all produced around 2.2 million vehicles in Canada in 2017, with about 85% of those for the export market, most of which sent to the US.

The Canadian auto industry is already in decline, having shed 53,000 jobs between 2001 and 2014. The biggest winner from the NAFTA agreement has been Mexico which overtook Canada in auto production in 2008. Even without the 25 percent tariff, Canadian production is expected to decline by 135,000 units between 2016 and 2020, whilst Mexican production is expected to increase by 850,000.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, which represents Canada’s auto suppliers said: “If your objective is to have the American companies as well as the Japanese set up on the U.S. side of the border, you’re asking private companies to absorb billions of dollars of costs. At a time when the U.S. is targeting China, it is infinitely dumb.”

Jerry Dias, national president of Unifor, which represents Canadian autoworkers at GM, Ford and FCA said: “It’ll hurt the U.S. as much as it’ll hurt Canada. He’s going to have to explain to all those auto parts workers why his strategy makes sense as they’re sitting on the unemployment line.”

At this stage it is not known whether Trump’s threat is merely some chest thumping exercise, but what is clear is that should the tariffs be imposed it will hurt US consumers as well as devastate the Canadian auto industry. It’s a lengthy and timely process takes a long time to move any auto production, meaning that American consumers would be forced to pay the price for a number of years to come.

Author: Jacob Maslow

On the DISPATCH: Headlines  Local  Opinion

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