Trump’s 25% tariff could be an existential threat to Canada’s recovering auto industry.

DETROIT – Concerns are growing about the president-elect. Donald TrumpThere is a plan to impose. 25% tariff A country’s reliance on Canadian imports would be an existential threat to the automotive industry.

Potential tariffs on vehicles and automotive parts are particularly dangerous for the province of Ontario, the center of Canada’s auto industry. Five car makers – Ford Motor, General Motors, Stellantes, Toyota Motor And Honda Motor — produced 1.54 million light-duty vehicles in the province last year, mostly for U.S. customers.

“It’s going to be terrible. It’s not only going to destroy Canadian jobs, it’s going to destroy American jobs,” Ontario Premier Doug Ford told CNBC in a phone interview.

Tariffs are taxes on imports, or foreign goods, that are brought into the U.S. They are paid by companies, which some fear will result in additional costs to consumers.

Ford, who said he has not spoken directly with Trump, argued that any tariffs would be harmful to both sides of the border.

He said raw materials and components cross the border several times before being used in the final assembly of the vehicle. He warned that the tariffs would raise prices, which could slow production and eliminate jobs.

“We have a trade agreement right now. Things are working out,” Ford said. “I’ve said publicly: I’d love to have a bilateral trade agreement with the U.S. and Mexico wants a trade agreement, we’ll do a bilateral trade agreement with Mexico. But Mexico, if they want a seat at the table. , they have to follow the rules.”

Trump has said he will impose an additional 10 percent tariff on goods from China. 25% levy for Canada and MexicoAlthough it did offer some details, such as if there would be exceptions. He has said he plans to raise “national security” concerns to enact such an increase instead of seeking approval from Congress, saying illegal immigration and the illegal drug trade are a threat. Causing concerns at the border, justifying tariffs.

Tariffs on parts from Mexico, Canada and China could add $600 to $2,500 per vehicle, according to estimates in a Wells Fargo analyst note. Prices for vehicles assembled in Mexico and Canada — which account for about 23 percent of vehicles sold in the U.S. — can rise from $1,750 to $10,000.

Such tariffs and rising costs will add to the woes of Canadian Prime Minister Justin Trudeau, as he Withholds demands for his resignation..

Ontario recently launched a multi-million dollar advertising campaign in the United States to promote its role as a major trading partner. “The Ally of the North.”

Ontario, as a province, is the third-largest trading partner for the United States, including the top foreign trading partner for 17 states, according to Ford, the premier. He points out that trade between Ontario — as well as broader Canada with the U.S. — is much more evenly distributed than with Mexico, especially as Canada diverts oil shipments to the U.S.

Canada’s auto parts exports will reach $23.5 billion in 2023, while light vehicle exports total $53.5 billion. According to the Canada-based, imports of $47.5 billion and $70.4 billion, respectively DesRosiers Automotive Consultants. Of these, the United States accounts for 95.3% of Canada’s total auto exports and 57.7% of its total auto imports..

“Anything that affects that balance will affect both sides of the border,” said Flavio Volpe, head of the Canadian Automotive Parts Manufacturers Association. “The optimal level of tariffs for Canadian and U.S. auto parts suppliers is zero.”

Volpe argues that a double-digit tariff would have “extensive” effects on the U.S. automotive industry. As an example, he pointed to 2022, when Canadian truckers blocked the Ambassador Bridge between Detroit and Windsor, Ontario in Canada — the busiest border bridge between the countries. Disruption of manufacturing For many automakers in the US

Toyota is the top automaker in Canada with about 526,000 units in 2023, followed by Honda with about 378,500 vehicles. GM, once the largest producer of more than 1 million vehicles in Canada, is now one of the smallest manufacturers of light-duty vehicles in the region.

Canada’s automotive industry is growing rapidly after a decades-long decline that was exacerbated during the coronavirus pandemic.

Light-duty vehicle production in Canada hit 1.54 million vehicles last year, up from a recent low of 1.1 million in 2021, but still down 47 percent from the country’s peak of 2.9 million in 2000, Global said. According to industry data provided by automakers. Canadian Trade Association

“This industry, like the US industry, has been challenged to recover from the pandemic. We’re still not there from a sales and production standpoint, but we’re recovering,” said David Adams. Canada’s global automakerswhich represents the interests of 16 non-US automakers.

This increase comes despite the fact that Ontario owns two major assembly plants, Ford and Stellantis, because the factories currently do not have vehicles to produce. Thousands of workers have been laid off due to reduced production.

Much of the uncertainty was caused by the automotive industry’s transition to all-electric vehicles, viz Adoption of EVs Not as fast as expected. Trump has also pledged to remove subsidies for EV purchases, which have helped boost sales while federal benefits are still in place.

“There is as much concern about Canada’s automobile industry as it is unclear which direction to go,” said Charlotte Yates, president of the Automotive Policy Research Center and professor emeritus at McMaster University. “There are a series of changes in public policy as well as changes in political attitude, and of course, the threat of tariffs is disrupting the industry in Canada.”

Ford, the Ontario premier, said the U.S. and Canada must work together, as they have for decades.

“We should be focusing on China and Mexico, not its closest ally around the world,” Ford said. “Let’s build a fortress, an American-Canadian fortress against the rest of the world. If we stick together, we can’t be stopped.”