If Donald Trump’s threat of a 50 per cent tariff on Canadian cars, trucks and automotive parts actually happens, it would be a devastating blow for this country’s already-beleaguered automotive sector, analysts say.
Trump’s latest threat in the U.S.-Canada trade war came Monday morning in a post on Truth Social, in which he threatened to double the current 25 per cent tariff on Canadian-made cars and trucks, as well as hitting Canadian automotive parts, which have thus far been largely free of tariffs.
“If there’s a scale from ‘this is a challenge’ to ‘this is cataclysmic,’ 50 per cent would be much closer to the right side than the left,” said Greig Mordue, an engineering professor at McMaster University and a former senior executive at Toyota Canada.
While Trump’s threat may have partly been a fit of pique over Canada’s decision to walk away from trade talks late Friday, there’s no question of the damage it could do if it’s actually implemented, said Ryan Robinson, head of automotive research at Deloitte Canada.
“If we took the U.S. administration at their word over the last two years, their whole objective was to move the entire Canadian automotive industry to the U.S.,” said Robinson. “This is a pretty rapid acceleration of that objective if it comes to pass.”
Even if the latest threat doesn’t materialize, it will keep automotive companies from making long-term investment decisions, both in Canada and south of the border, Robinson added.
North American auto industry is at ‘maximum uncertainty’
“In a sector where we need certainty, we’re in the exact opposite position right now,” Robinson said. “We’re at maximum uncertainty.”
In a social media post, the head of Canada’s largest private sector union blasted the latest threat from Trump.
“President Trump’s latest intimidation tactic … is another attempt to force Canada into surrendering our auto industry and the good jobs that it supports,” wrote Unifor national president Lana Payne, who represents tens of thousands of automotive workers. “The U.S. administration fails to recognize that our highly integrated auto industry means ongoing instability hurts workers on both sides of the border and makes it increasingly difficult to build cars in North America.”
For the so-called Detroit Three manufacturers, Ford, GM and Stellantis, a 50 per cent tariff would hasten a trend already seen over the last two years — shifting production out of Canada and into the U.S., or idling Canadian plants, said McMaster’s Mordue.
For Toyota and Honda, the move southwards wouldn’t be as quick because they don’t currently have excess capacity in the U.S. But it would mean their days of building in Canada could be numbered, Mordue added.
He estimated that the two Japanese automakers would face a combined additional $10 billion in annual costs if the 50 per cent threat is implemented, with Toyota getting hit hardest.
Automakers have to be asking, ‘why are we in Canada’
“If you’re Toyota, you’d be facing an extra $7 billion a year (in tariff costs). Your global profits are $15 billion. You can’t write off half of your global profits because of an issue in one country. If you’re Honda, you’re looking at this with even greater urgency because you don’t have any profits, so can’t just keep eating an extra $3 billion,” said Mordue. “You have to be asking, ‘why are we in Canada?’”
Already, the Japanese automakers have been looking for ways to shift production from Canada to the U.S. The latest threat would hasten that process, Mordue predicted.
“You still need to continue to build vehicles in Canada for as long as it takes to build an assembly plant in the U.S., and that takes about three years,” said Mordue. “The D3 has idle capacity. They can shift production from Canada to the U.S. with relative ease.”
The head of the Global Automakers of Canada, which represents non-U.S. auto manufacturers, said the threatened increase would be “terrible” for the automotive sector here.
“It would increase costs exponentially,” said GAC CEO Lucas Malinowski. “This industry has been built over decades of tariff-free trade between Canada, the U.S. and Mexico.”
It’s also self-harm for the American economy, Malinowski added.
“These tariff policies are undermining the manufacturing industry for the entire continent,” he said.
