Canada to retaliate against auto tariffs
Warning from Trudeau was delivered to Trump administration
WASHINGTON— The Canadian government promised Thursday to hit the U.S. with “proportional” retaliatory tariffs if U.S. President Donald Trump follows through on his threat to impose tariffs on automobiles and auto parts made in Canada.
Kirsten Hillman, Canada’s deputy ambassador to the U.S., delivered the threat from Prime Minister Justin Trudeau at a Washington hearing called by the Trump administration as part of its investigation into whether foreign auto imports are damaging U.S. national security.
Canada, Hillman said, was forced to respond to Trump’s tariffs with “commensurate counter-tariffs.”
She continued: “Should this investigation ultimately result in the application of tariffs on autos, Canada will once again be forced to respond in a proportional manner.” The Canadian government was part of a near-unanimous international chorus in opposition to the tariffs, which Trump is threatening to impose on all imports of foreign autos and auto parts. It was not just foreign countries that were critical: representatives for every major segment of the U.S. auto industry — domestic automakers, foreign automakers operating in the U.S., parts manufacturers, dealership owners, and others — told the administration that the tariffs would severely harm American businesses and consumers.
One by one, the speakers also said there was no justification for the suggestion that auto im- ports hurt U.S. security. Hillman showed particular disdain.
“In your investigation, you are being asked to examine a specific industrial sector: automobiles and auto parts. Not tanks. Not battleships. Civilian passenger vehicles and parts,” she said. “The U.S. Department of Defense does purchase such vehicles, but U.S. military demand is a tiny fraction of U.S. auto production …. So where is the necessary nexus between civilian vehicles and national security? There is none, and there’s no basis for finding one.”
Foreign Affairs Minister Chrystia Freeland strongly suggested in June that the Trudeau government would retaliate against any Trump auto tariffs, saying its response would be “equally firm and clear” as its dollar-for-dollar response to his steel and aluminum tariffs. But she had not publicly promised such tariffs as Hillman did.
Jim Wilson, Ontario’s trade and economic development minister, spoke against the tariffs immediately after Hillman. He said Premier Doug Ford’s government stands “shoulder to shoulder” with Trudeau on the issue.
“If auto tariffs are imposed, everybody loses,” Wilson said, predicting job losses in both Canada and the U.S. He said “the Canadian auto industry has supported U.S. national security interests for decades.”
Trump, who also used controversial “national security” grounds to impose the steel and aluminum tariffs, has continued to threaten the auto tariffs despite overwhelming opposition in the U.S. At the hearing, only one of the 24 speakers who preceded Hillman expressed even tentative support.
“The unity is as remarkable as it is unprecedented,” said John Bozzella, chief executive of the Association of Global Automakers, which represents automakers based outside the U.S. Bozzella noted that no U.S. au- tomaker or auto parts supplier has even asked for protection.
The one group that endorsed Trump’s investigation was the United Auto Workers union, which said “targeted” protection would help a U.S. industry that has suffered job losses and wage depression because of competition from low-wage countries. But even the UAW representative, Jennifer Kelly, warned Trump to tread lightly on tariffs, saying, “Any rash actions could have unforeseen consequences, including mass layoffs of American workers.”
In a written submission, the UAW said Canada “should not be held in the same light as more egregious actors that use predatory trade practices to flood our domestic markets with vehicles made by exploiting workers.” Angry with the European Union’s trade practices, Trump has issued explicit threats to impose hefty tariffs on European cars. But he has not ruled out tariffs on cars from other places, even from the North American countries with which the U.S. has a tightly integrated supply chain and a free-trade agreement.
“Canadian cars are U.S. cars,” Hillman said. “Auto parts and components cross the border multiple times before a car leaves the assembly line in Canada, and, as a consequence, assembled vehicles exported from Canada to the United States contain more than 50 per cent U.S. content.”
Canada would feel a much bigger economic impact from a titfor-tat exchange of auto tariffs than from the exchange of tariffs on steel and aluminum. It exported $57 billion (Canadian) in automobiles and $15 billion in auto parts to the U.S. last year, according to Canadian data, more than four times the value of its steel and aluminum exports to the U.S.
The U.S. exported about the same total value of automobiles and auto parts to Canada, approximately $70 billion, Hillman told the hearing.
Automakers said that Trump’s tariffs would raise the price of the average car by about $2,600 (Canadian) for a U.S.-built car to about $8,000 for an imported car. A Scotiabank analysis estimated that the impact of the tariffs would depress Canadian growth by about half a percentage point, about the same about as the end of NAFTA — and “could presage an all-out trade war.”
Imposing retaliatory tariffs, Hillman said, is not Canada’s preference.
“Canada’s priority is, and always has been, to work with our American friends to strengthen the integrated Canada-U.S. economy, and to ensure that our auto sectors flourish together,” she said.