Trump’s tariff threat rattles Canadian auto sector

Undoing the integrated supply chain could take months — if it can be done at all

U.S. President Donald Trump’s threat to impose 25-per-cent tariffs on auto imports from Canada would devastate the integrated supply chain that has been built up over decades and also cause job losses on both sides of the border, industry experts warn.

“It’s definitely going to impact the whole supply chain of automobiles in Canada and in the U.S.,” says Laurie Tannous, special adviser for the University of Windsor’s Cross-Border Institute.

The North American auto sector is so highly integrated that parts and components can cross Canada and Mexico’s borders as many as eight times before being installed in a final assembly plant.

Some experts say the tariff would be imposed on completed cars while others say it would be charged each time a part crosses into the U.S.

Shifting tool lines to the United States would be so complicated it could take many months if it can be done at all, Tannous said in an interview.

The U.S. initiated an investigation to determine if automobile imports threaten to impair national security. Imports of passenger vehicles have grown to 48 per cent from 32 per cent of cars sold two decades ago while employment in auto production has declined 22 per cent, U.S. Commerce Secretary Wilbur Ross said.

Trump’s strategy appears aimed at returning the auto supply chain back to the U.S. While Canada and Mexico currently pay no tariffs, manufacturers in Japan and the E.U. pay 2.5 per cent but charge U.S. products 10 per cent.

The implications of a high auto tariff would be felt by everyone working in the auto sector and beyond, said Jerry Dias, president of Unifor, which represents Canadian auto workers.

“Sixty-five per cent of all parts that go into a Canadian assembled vehicle comes from the United States, so there’s no way they can get out of this thing unscathed,” he said.

Canada’s auto sector, which is the country’s leading export, employs 120,000 workers — 40,000 in assembly and 80,000 in auto parts and delivers $80 billion in economic activity.

Dias said auto industry bosses won’t sit idly by if Trump hurts their bottom lines by choking off the supply of components before U.S. ones are built.

“You’ll end up with bankruptcies before that happens,” he said.

Besides, the industry is operating at capacity so there’s no room in assembly plants to add models.

It’s unclear how many Canadians would lose their jobs, Dias said. Proposed tariffs would cause between 157,000 and 195,000 American workers to lose their jobs over at least one to three years, according to two U.S. reports.

The impact would increase to 624,000 if auto producers such as Canada retaliate with tariffs of their own, says a report from the Peterson Institute for International Economics. The U.S. Chamber of Commerce said 760,000 jobs would be lost from tariffs on aluminum, steel and autos.