Canadian and American flags fly near the base of the Ambassador Bridge connecting Canada to the U.S. in Windsor, Ontario, Canada, on Wednesday, May 26, 2021.
Cole Burston | Bloomberg | Getty Images
DETROIT — There’s growing concern that President-elect Donald Trump‘s plan to impose 25% tariffs on Canadian imports would be an existential threat to the country’s recovering automotive industry.
Potential tariffs on vehicles and automotive parts are particularly alarming for the province of Ontario, the epicenter of Canada’s auto industry. Five automakers — Ford Motor, General Motors, Stellantis, Toyota Motor and Honda Motor — produced 1.54 million light-duty vehicles last year in the province, largely for U.S. consumers.
“It’d be terrible. It’d not only devastate Canadian jobs, it’d devastate American jobs,” Ontario Premier Doug Ford told CNBC during a phone interview.
A tariff is a tax on imports, or foreign goods, brought into the U.S. They are paid for by companies, which some fear would simply pass any additional costs on to consumers.
Ford, who said he has not spoken with Trump directly, argued that any tariffs would be harmful to both sides of the border.
He said raw materials and parts routinely pass across the border multiple times before being used in the final assembly of a vehicle. Tariffs, he warned, would increase prices, which could then slow production and eliminate jobs.
“We have a trade agreement right now. Things have been working,” Ford said. “I’ve said it publicly: I’d love to do a bilateral trade deal with the U.S. And Mexico wants a trade deal, we’ll do a bilateral trade deal with Mexico. But Mexico, if they want a seat at the table, they have to follow the rules.”
Ontario premier Doug Ford answers questions from reporters as he hosts the Fall meeting of Canada’s premiers in Mississauga, Ontario, Canada December 16, 2024.
Carlos Osorio | Reuters
Trump has said he will impose an additional 10% tariff on goods from China and a 25% levy for Canada and Mexico, though he has offered few details, such as if there would be exceptions. He has he said plans to invoke “national security” concerns to enact such hikes, rather than seeking congressional approval, saying illegal immigration and the illicit drug trade are causing concerns on the border, justifying the tariffs.
Putting tariffs on components could add $600 to $2,500 per vehicle on parts from Mexico, Canada and China, according to estimates in a Wells Fargo analyst note. Prices on vehicles assembled in Mexico and Canada — which account for about 23% of vehicles sold in the U.S. — could rise $1,750 to $10,000.
Such tariffs and increased costs would add to problems for embattled Canadian Prime Minister Justin Trudeau, as he fends off calls for his resignation.
Ontario: Canada’s auto capitol
Ontario recently launched a multimillion-dollar ad campaign in the U.S. to promote its role as a key trading partner and “ally to the North.”
Ontario, as a province, is the third-largest trading partner for the U.S., including the top foreign trade partner for 17 states, according to Ford, the premier. He points out that trade between Ontario — as well as broader Canada with the U.S. — is much more evenly split than it is with Mexico, especially when removing the oil Canada sends to the U.S.
Canada’s Prime Minister Justin Trudeau addresses the Liberal party caucus meeting in Ottawa, Ontario, Canada December 16, 2024.
Blair Gable | Reuters
Canadian exports of auto parts came in at $23.5 billion in 2023, while exports of light vehicles totaled $53.5 billion. Imports totaled $47.5 billion and $70.4 billion, respectively, according to Canada-based DesRosiers Automotive Consultants. Of those, the U.S. accounts for 95.3% of Canada’s total auto exports and 57.7% of its overall auto imports.
“Anything that kind of disrupts that balance is going to 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 a double-digit tariff would be “existential,” with ripple effects into the U.S. automotive industry. As an example, he pointed to 2022, when Canadian truck drivers blocked the Ambassador Bridge between Detroit and Windsor, Ontario, in Canada — the busiest border bridge between the countries — disrupting manufacturing for several automakers in the U.S.
Toyota is the top-producing automaker in Canada, at roughly 526,000 units in 2023, followed by Honda at nearly 378,500 vehicles. GM, once the largest producer in Canada at more than 1 million vehicles, is now one of the smallest manufacturers of light-duty vehicles in the region.
Industry on the mend
The Canadian automotive industry is on an upswing following a decades-long decline that escalated during the coronavirus pandemic.
Light-duty vehicle production in Canada hit 1.54 million vehicles last year, up from a recent low of 1.1 million in 2021, but still a 47% decline from the country’s peak of 2.9 million in 2000, according to industry data provided by the Global Automakers of Canada trade association.
“The industry, like the American industry, has been challenged recovering from the pandemic. We’re still not there from a sales and production point of view, but we have been recovering,” said David Adams, president of the Global Automakers of Canada, which represents the interest of 16 non-U.S. based automakers.
The uptick comes despite two large assembly plants in Ontario, owned by Ford and Stellantis, existing in limbo, as the factories don’t currently have vehicles to produce. Thousands of workers have been laid off as a result of the lack of production.
Much of the uncertainty was caused by the automotive industry’s transition to all-electric vehicles, as adoption of EVs has not occurred as quickly as expected. Trump also has vowed to remove subsidies for purchasing EVs, which have assisted in spurring sales while federal benefits still exist.
“There is profound concern about the Canadian automobile industry as much because it’s not clear what direction to go,” said Charlotte Yates, president of the Automotive Policy Research Centre and professor emeritus at McMaster University. “There’s a series of public policy changes as well as political attitudinal changes, and, of course, the threat of tariffs really rattling the industry in Canada.”
Ford, Ontario’s premier, said the U.S. and Canada should be working together, as they have been for decades.
“We should be focusing on China and Mexico, not on its closest ally in the entire world,” Ford said. “Let’s build a fortress, an American–Canadian fortress against the rest of the world. We can’t be stopped if we if we stick together.”
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