Trump-proposed tariffs would cripple Ontario's auto industry, says Cross-Border Institute

Donald Trump is considering imposing tariffs of up to 25 per cent on all vehicles imported into the United States — a decision being referred to as "the most outrageous trade action that's ever been taken by the Trump administration."

The Trump administration said Wednesday it had launched a national security investigation into car and truck imports that could lead to new U.S. tariffs similar to those recently imposed on imported steel and aluminum.

Bill Anderson, director of the Cross-Border Institute at the University of Windsor, describes the move as "very, very extreme."

"It would essentially shut down or cripple the industry. And, in this case, you're protecting American firms from themselves because most of the cars are being produced by American firms in Canada and in Mexico."

Trump on NAFTA

The Commerce Department said Wednesday that the administration was considering imposing tariffs on all imported vehicles under a rarely-used section of the Trade Expansion Act of 1962.

The clause gives the U.S. president the power to impose tariffs on just about any foreign product if the White House deems they would "threaten to impair the national security."

"The fact that [Toyota] RAV4s and Chrysler minivans are made in Ontario rather than the United States really doesn't threaten the security of the United States against military enemies, and so I think it's probably the most outrageous trade action that's ever been taken by the Trump administration," Anderson said.

Anderson describes the move as having a "political narrative" — a way for Trump to avoid accusations of having done nothing about NAFTA.

"It's clear that nothing's going to get resolved on NAFTA before the mid-term elections," he said. "This is something that can't be imposed right away. Under U.S. law, it would take quite a few months or as much as a year to go through the process."

Leveraging 'low-cost' countries

The ongoing NAFTA negotiations have been a concern for local manufacturers of automotive parts.

LAVAL Tool & Mould in Windsor, Ont., which calls itself one of the leading compression mould makers in North America, has been receiving daily updates from both the Ontario government and negotiators in Washington.

"We've always taken Trump's rhetoric as nothing more than rhetoric ... he likes to tweet. The best thing is not to react to them," said LAVAL president Jonathon Azzopardi.

Azzopardi said he has been receiving good information from both governments "before the news is getting it." He said the United States is trying leverage "low-cost" countries.

"Canada is not a low-cost country. If you look at us versus Mexico, obviously our costs are much higher here which means we sacrifice the same in Canada and the U.S. ... I think our losses in Canada have actually been higher than in the United States," he said.

Azzopardi said the main point of contention for Canadian parts suppliers is the 'sunset clause' - which would allow one of the three North American Free Trade Agreement members to quit the pact after five years.

"This is a long-term agreement. A 'sunset clause' over five years is nothing more than a negotiating tactic," he said.

Fighting the wrong enemy

In 2013, Ford invested $700 million in its Oakville plant. In 2016, Fiat Chrysler committed to invest a total of $554 million across its Ontario plants, a year after investing $2 billion retooling its minivan plant in Windsor. And in 2018, Toyota invested $1.4 billion in its Cambridge North plant and its West plant in Woodstock, Ont.

Anderson points to these investments as indicators of Canada's role as an ally to the United States. He said Trump is demonstrating an under-appreciation of Canada's contribution to the North American automotive sector.

"There's no compulsion for [these companies] to do that," Anderson said. "They're doing that because it makes sense economically and it's beneficial to the entire North American auto industry. That's what competes with the rest of the world."

Response of the NDP

Upon Trump's announcement, Essex MP Tracey Ramsey sent a letter to Foreign Affairs Minister Chrystia Freeland asking that she defend Canada's automotive and manufacturing sectors.

Ramsey said she is calling on the Liberal government to take immediate action in protecting Canada's auto sector from "unnecessary hardship and job losses."

"This is yet another blow from President Trump — one that could significantly harm hundreds of thousands of workers in the automotive sector, including thousands of jobs in my region of southwestern Ontario," she said.

"The repercussions of Trump's relentless bullying tactics could be devastating to our auto industry, and will have thousands of Canadians worried about their jobs."