Canada may be hit by Trump auto tax
President-elect’s team signals northern neighbour may not be spared
The Trump administration is signalling Canada could face the same retaliatory trade measures as Mexico, in what would be an even bigger disruption to automakers such as Toyota Motor Corp and Fiat Chrysler Automobiles NV.
Asked whether an auto border tax could impact Canada, President-elect Donald Trump’s spokesman, Sean Spicer, told reporters their policy isn’t specific to any one country. “When a company that’s in the US moves to a place, whether it’s Canada or Mexico, or any other country seeking to put US workers at a disadvantage,” Spicer said on a conference call Friday, then Trump “is going to do everything he can to deter that”.
Any move to thwart imports from Canada would be a more severe impediment to the North American auto sector than sanctions against Mexico, since the industry’s links with the US’ northern neighbour run deeper. Assembly in Canada, which along with the US is a highercost producer than Mexico, is also focused on the more profitable and faster growing lighttruck and sports vehicle segment of the market. “Canada is building a lot of vehicles that are in demand,” said Kevin Tynan, a senior auto analyst for Bloomberg Intelligence.
Back and forth
Through October, the US imported $37 billion (Dh136 billion) worth of passenger cars from Canada last year, a 12 per cent increase, according to Bloomberg Intelligence. That compares with $19 billion in imports from Mexico, which have been on the decline.
Michigan-based automakers such as Ford Motor Co often ship parts back and forth across the border to factories in Ontario, and made commitments to invest in Canada earlier this year while finishing union contract negotiations. Border taxes would hurt both nations, according to Linda Hasenfratz, chief executive officer of Guelph, Ontariobased auto-parts maker Linamar Corp. “We are trying to be globally competitive” in North America against overseas rivals, she said Wednesday on Bloomberg TV Canada. The industry is “intertwined” with “parts going back across the border multiple times.” The US rang up a $9.1 billion (Dh33.4 billion) merchandise trade deficit with Canada through November of last year, lagging the Mexican shortfall of $58.8 billion. Mexico has also moved ahead of Canada as a supplier of products to the US on the strength of growing investments in auto factories there. Up to now it’s worked, with the president-elect focusing most of his calls for fair trade on Mexico and China. Trump’s spokesman’s comments represent the first major broadside from Trump’s office against Canada, which generates $541 billion worth of annual trade with the US.
The auto industry is global in nature and all vehicles contain a percentage of non-domestic content, Toyota Motor Corp spokesman Aaron Fowles said in an emailed statement. This type of tax will have an impact on every part and product that is imported to the US, which means that prices for all vehicle makes will increase.
Montreal-based National Bank Financial estimated a 10 per cent tax on goods crossing the American border would knock 9 per cent off the value of Canada’s exports there.