Canadian auto industry observers are reacting with shock and disbelief to news that U.S. President Donald Trump has ordered an investigation that could result in tariffs of up to 25 per cent on auto sector imports into the United States.
David Adams, president of the Global Automakers of Canada, which represents Japanese car manufacturers Honda and Toyota, says the news is “perplexing” because tariffs would make cars more expensive in the United States, hurting the U.S. consumers Trump wants to protect.
He says the harm in Canada caused by tariffs would vary depending on how severe and wide-ranging they are.
According to the Canadian Vehicle Manufacturers Association, the Canadian auto sector supports about 500,000 direct and indirect jobs. About 95 per cent of Canadian-made vehicles are exported to the United States.
Associate professor Sui Sui of Ted Rogers School of Management at Ryerson University says the tariffs could be devastating on Canada, but she doubts the U.S. will go through with them because the North American industry is so intertwined it would hurt the U.S. just as much.
The White House said in a statement Wednesday that Trump had asked Commerce Secretary Wilbur Ross to consider whether the imports of automobiles, including trucks, and automotive parts threaten U.S. national security.
The president said in the statement that “core industries such as automobiles and automotive parts are critical to our strength as a nation.”
Talks aimed at rewriting the North American Free Trade Agreement have stalled between the U.S. and Canada and Mexico, with the discussions at an impasse over rules for car production. The initiation of the trade investigation could be seen as an attempt to gain leverage in the talks with the two U.S. neighbours.
U.S. Treasury Secretary Steven Mnuchin has said that efforts to renegotiate the trade agreement could spill into next year.