Windsor-area auto industry warily watches NAFTA talks
Radix Inc. once had ambitious plans lined up for this summer. The Tecumseh-based company, which specializes in automation technology largely for automotive manufacturers, was planning to double the size of its facility in the Canadian border city. Business has been booming, and construction was set to begin in August. But nothing has happened. Indeed, the project is now on hold due to U.S. President Donald Trump’s steel tariffs that added hundreds of thousands of dollars to Radix’s expansion plans.
“We had to say: this is going to have to wait,” said Shelley Fellows, vice-president of operations. “Our ability to expand, to hire more people in the region, to service more of our customers, to grow our business — that has been directly and measurably impacted by the steel tariffs.”
The Canadian auto industry has faced significant uncertainty in recent months due to steel and aluminum tariffs, the potential for tariffs on U.S. imports of vehicles and automotive parts, as well as concerns about the future of the North American Free Trade Agreement. These factors has left many businesses in Windsor waiting with bated breath as the Canadian government re-entered NAFTA negotiations this week, hoping a deal can be reached that will restore much-needed certainty to the region.
Reaching a new NAFTA deal has been on the minds of many in the Windsor region since negotiations first began more than a year ago. Business leaders and Windsor Mayor Drew Dilkens earlier in August stressed the importance of signing a NAFTA agreement during discussions with Finance Minister Bill Morneau. “People in this community are unsure of what’s going to happen,” Dilkens said.
“There is obviously fear that comes with uncertainty and having a president who makes comments that you don’t know whether it’s rhetoric, whether it’s serious, or whether it’s going to change dayto-day. It causes confusion and uncertainty and when that happens, you have investment that’s left on the sidelines until the picture becomes clear.” That picture may finally become clear by the end of this week. On Monday, Trump announced that the U.S. had reached a bilateral agreement with Mexico that he said would replace NAFTA, putting pressure on Canada to quickly return to the negotiating table and strike a deal by Friday.
The U.S. and Mexico have reached an agreement on automotive rules of origin, which had been one of the most contentious aspects of the NAFTA negotiations. Under the proposed deal, 75 per cent of vehicle content would have to be from the U.S. and Mexico, up from the 62.5 per cent under the current NAFTA framework. As well, 40-45 per cent of car content would have to be made by workers making more than US$16 an hour, a move that would benefit Canada and the U.S.
Still, other issues remain, including Canada’s dairy supply management system. Chrystia Freeland, Canada’s minister of foreign affairs, cancelled her trip to Europe this week and flew to Washington to resume bargaining talks. Trump did not mince words on Monday when it came to what he sees as Canada’s option going forward. “It’ll either be a tariff on cars, or a negotiated deal,” he said. A tariff on imports of vehicles and automotive parts would devastate the Canadian automotive industry. A T.D. Economics report said the proposed tariffs would create “permanent ‘scarring ’” that would reduce Canada’s long-run economic capacity. One in five manufacturing jobs would be lost in Ontario. Windsor would be hit especially hard by automotive tariffs. “It’s the possibility of automotive tariffs that keeps me awake at night,” said Fellows. Fellows said mould makers in Windsor, including Radix Inc.’s parent company Active Industrial Solutions, have seen their margins drastically affected by the steel and aluminum tariffs, which raised costs that they were unable to pass down to their customers.
“In some cases, they are delivering on money-losing contracts. That’s just not a sustainable business model,” Fellows said. “We love to operate in Canada. There’s a lot of skill here, and lots of support for research and development in Canada ... But that choice may be taken out of our hands in the future, with all of this uncertainty.” For Laval International Tool and Mould, also based in Tecumseh, the steel and aluminum tariffs have resulted in a six per cent hit to the company’s bottom line. “That’s big when you’re only making margins of between eight to 12 per cent. It’s substantial,” said president Jonathon Azzopardi. Prime Minister Justin Trudeau was in Ontario on Wednesday and said he understands that the Americans and Mexicans want to get things done by Friday, but that whatever deal is agreed to has be the right deal for Canada.
“No NAFTA deal is better than a bad NAFTA deal,” Trudeau told reporters.