Optimism in Canadian automotive sector despite threat of tariffs by Trump

TORONTO — A potential trade deal between the United States and Mexico has been greeted with cautious optimism in the Canadian automotive sector, despite renewed threats by U.S. President Donald Trump to impose tariffs on the industry.

Trump said Monday that the U.S. and Mexico had reached a bilateral “understanding” on a trade agreement that could replace the existing North American Free Trade Agreement.

Details from the Office of the U.S. Trade Representative show the preliminary deal includes a wage provision that 40 to 45 per cent of auto content would be made by workers earning at least US$16 an hour, and an increase in the auto content required from the NAFTA region to 75 per cent, up from the current 62.5 per cent.

If auto content and wage agreements go forward with Canada on board as well, they could stem the flow of auto sector jobs to lower wage jurisdictions, Unifor president Jerry Dias said.

“I believe this should stop the bleeding in Canada.”

Dias said he was concerned Trump linked potential tariffs on Canada’s auto sector to concessions on the agricultural supply management system, but added that it was nothing new.

Investors welcomed the news, boosting automotive stocks on both sides of the border. Canadian auto parts manufacturer Martinrea International Inc. was up 6.42 per cent, Linamar Corp. rose 6.24 per cent and Magna International Inc. was up 4.11 per cent in mid-afternoon trading on the Toronto Stock Exchange.

Bill Anderson, director of the University of Windsor’s CrossBorder Institute, said he’s concerned about a condensed negotiation window now that key issues between the U.S. and Mexico look to be settled, but that the wage provision would help Canada.

“Essentially it’s a way of excluding Mexican content, so even though Canada and Mexico have presented a united front, you now have a situation where you could make the argument this will benefit Canada,” he said.

The timeline for negotiations could be tight, as a deal would have to be reached by Friday to meet a 90-day notice window for an agreement to be signed by outgoing Mexican President Enrique Pena Nieto and for the U.S. Congress to act before any changes occur in November’s midterm elections.

Canadian Vehicle Manufacturers’ Association president Mark Nantais said it was time for the Canadian government — which has been excluded from the talks between its North American counterparts in recent week — to get back to the table.

“Canada’s got a very small window here in which to step up, and we certainly encourage them to do that.”

A spokesperson for Foreign Affairs Minister Chrystia Freeland said she will head to Washington on Tuesday to rejoin faceto-face negotiations with the U.S. and Mexico on trade.