Canadian auto sector fears ‘catastrophic’ tariff effects
TORONTO U.S. tariffs on vehicles and auto parts made in Canada would be “catastrophic” for the economy, while a retaliatory response by Ottawa could inflate the cost of new vehicles by between $5,000 and $9,000, says a group representing car dealers.
The Canadian Automobile Dealers’ Association (CADA) released a report on Friday detailing the potential impact of U.S. President Donald Trump’s proposed tariffs on vehicles and auto parts, which could be as much as 25 per cent.
According to the report, the imposition of the hefty tariffs would immediately put nearly one in five — between 25,000 and 30,000 — jobs at new vehicle dealerships at risk, in addition to the more than 100,000 manufacturing jobs that would also be in danger.
“The tariffs threatened by the U.S. president would be nothing short of catastrophic for our sector, and we feel the entire Canadian economy,” CADA’s chief economist Michael Hatch said at a press conference in Ottawa.
“Recent steel tariffs and retaliation measures by the Canadian government are minimal compared to the tsunami-like economic downturn that will occur should we lose NAFTA or be subject to a 25 per cent tariff on automotive.”
While the report highlights the potential detrimental effects auto tariffs could have on the Canadian economy, it stressed that American consumers would bear the brunt of the tariffs, through higher vehicle prices and suppressed vehicle supply.
At the same time, Canadian consumers will not be immune, particularly if the federal government decides to engage in a tit-for-tat retaliation as it did in response to the Trump administration’s steel and aluminum duties.
“If the Canadian government sees fit to respond in kind, the consequences will be even more severe for Canada, its economy and, most importantly, its consumers,” Hatch said.
In 2016, the average vehicle transaction price was close to $40,000 in Canada, with a large portion of those vehicles coming from the U.S. According to the report, if Canada imposes a matching 25 per cent tariff on vehicles from the U.S., consumers would face an average price increase of between $5,000 and $9,000.
“Vehicles directly impacted by the tariff would increase in price almost immediately,” the report said.
“Those not impacted directly would likely face upward price pressures as the tariff compromises the supply of vehicles across the board.”
In the event that Canada imposes retaliatory tariffs, CADA urged the government to allow a sales tax exemption on new vehicle sales to ease the burden on consumers as well as create a scrappage program that would encourage people to retire older vehicles.
CADA, which represents 156,000 employees at dealerships across the country, also called on the government to consider corporate and personal tax reforms to enhance Canadian competitiveness.
Global automakers, parts manufacturers and other industry representatives have widely criticized the potential tariffs, warning the Trump administration that it would hurt the U.S. auto industry and American consumers.
CADA’s chief executive John White warned a House of Commons committee last month of the economic downturn that would result if tariffs on autos are imposed.
“In our view, the effects of the 2008-2009 economic situation would pale in comparison to what our members and the Canadian economy would face if we end up with a 25-per-cent tariff on our cars,” he said.
Magna’s chief marketing officer said in a letter to Commerce Secretary Wilbur Ross in late June that the proposed tariffs would affect both the U.S. and Canada while leading to job losses and price increases for consumers.
“Tariffs or other trade barriers on imported automobiles and/or automotive parts would weaken the U.S. economy and threaten to undermine the entire U.S. automotive industry,” Tobin wrote.