Trump going ahead with 25% tariffs on autos
This could be the U.S. president's most devastating trade action yet
U.S. President Donald Trump has levelled what may be his most devastating tariffs yet, hitting a sizable chunk of the cross-border auto trade and potentially all of it at a later date.
A new 25 per cent duty will strike all finished vehicles imported into the United States starting on April 3, then some parts within weeks and perhaps all parts eventually.
It's a frightening prospect for hundreds of thousands of Canadians whose jobs are connected to the auto sector — the largest manufacturing industry in Canada and second-largest source of exports to the U.S. after oil.
Amid the confusing tangle of tariffs, one goal stands out with striking clarity. Trump laid it bare from the Oval Office as he announced the measures.
His clear objective? Make life so difficult for companies that export to the U.S. that they simply give up and move production lines there.
"All we're doing is saying you can't come in unless you build here," Trump said on Wednesday.
His stance marks the end of a decades-long period of Canada-U.S. free trade in automobiles. In fact, Trump is even imposing higher U.S. tariffs than existed before the 1965 Auto Pact.
Autos are by far the most lucrative manufactured product that Canada sells to the world. This makes these tariffs potentially more significant than any of the other trade threats from Trump, including the 10 per cent levy on energy and the 25 per cent tariffs on steel and aluminum.
The full impact is not yet clear. Trump has not explicitly spelled out how many component parts will be penalized. Cars exported to the U.S. under the Canada-United States-Mexico Agreement (CUSMA) might yet be hit with tariffs on their non-American components, pending a review, according to the executive order.
Federal leaders speak out against tariffs
The news swiftly reverberated in Canada on the campaign hustings.
Liberal Leader Mark Carney said he would return to Ottawa and, as prime minister, convene a meeting on Thursday of the Canada-U.S. cabinet committee.
He suggested that retaliatory measures might follow, and he fumed at Trump's actions as an abdication of the continental trade agreement.
"This is a violation and he has betrayed our trade agreement," Carney said. "A response will happen soon. I won't say more. When it comes to our options, we do have options."
Earlier Wednesday, Carney promised a $2-billion package to protect Canada's auto industry.
Conservative Leader Pierre Poilievre said Trump needs to "knock it off" with his trade war.
"We had the best trade relationship in the world, in the history of the world, before these unnecessary interruptions struck our economy, and they're hurting both sides of the border," he told reporters Wednesday evening.
Poilievre blamed Liberal "weakness" for the position Canada is in and said the country needs to diversify its trade markets and cut taxes to help workers and businesses.
NDP Leader Jagmeet Singh said Trump's latest action was a "full frontal attack on autoworkers."
"There are hundreds and thousands of workers right now that are wondering if their line is going to shut down and if they're going to lose their job.... We've got to fight back like hell," he said.
Singh called for retaliatory tariffs and supports for workers, and said Carney should have recalled Parliament to pass legislation to support workers before calling an election.
Ontario Premier Doug Ford said Canada will need to fight the new tariffs — and called for retaliatory tariffs that "maximize the pain for the Americans."
"I feel terrible for the Americans, but it's one person, it's President Trump that is creating this chaos," he told reporters at Queen's Park. "We aren't going to roll over. We're going to do everything we possibly can."
One analyst lamented that this is a departure from 60 years of tradition, starting with the 1965 Auto Pact that led to Canada-U.S. free trade. Furthermore, it makes a mockery of the agreement that Trump himself signed, CUSMA, which was supposed to allow for stable, predictable trade.
"The Americans have lost their credibility in terms of being a reliable trading partner," said Fraser Johnson, an expert on auto supply chains at Western University's Ivey Business School in London, Ont.
He said Trump's initial move won't fully stall the industry. For starters, nearly three-quarters of Canada's auto jobs involve parts, not finished vehicles. But the vast majority of those finished vehicles are exported to the U.S.
The tariffs will do real damage, Johnson said, with little benefit to the U.S., as it takes years to build new assembly plants, meaning new supply lines won't magically appear in the U.S. overnight.
"This is not good news for anybody," he said. "I don't really see how it helps the North American auto industry — certainly in Canada but also in the U.S."
Flavio Volpe, president of the Automotive Parts Manufacturers' Association, said it's creating paralyzing uncertainty for the industry — and not just in Canada.
The constant, always-evolving tariff threat is also scaring investors in the U.S., he told CBC News.
"[Trump] moves the sticks twice a day," he said on Wednesday while awaiting the announcement. "You don't know what to expect when you get up in the morning."
Speaking before the announcement, Volpe correctly predicted the 25 per cent tariff, but with some exemptions, possibly on North American parts traded under rules in CUSMA, the deal Trump himself made.
Canada is, indeed, a rare trading partner for the U.S.
Unlike the rest of the world, it actually buys more cars and parts from the U.S. than it sells. The first Trump administration produced a report on auto tariffs and it barely mentions Canada. It showed that Canada's share of North American auto production has been relatively stable since the 1980s, and that the real shift has been from U.S. production to Mexico.
But this second Trump administration is more aggressively embracing trade protectionism, and the threat of it, in the hope of steering production to the U.S.
ABOUT THE AUTHOR
