Canada’s automotive exports could be in danger as Trump threatens new tariffs

Noah Bergstrom / September. 27th, 2018

Donald Trump addressing UN at 73rd united nations general assembly.
(@realDonaldTrump / Twitter)

Donald Trump has made clear that if NAFTA negotiations are to go forward, Canada’s economy will have to sacrifice something in the deal, and his target to this point has been the Canadian dairy industry and our supply management tactics. While addressing the United Nations, Trump seemingly attempted to threaten Trudeau into a NAFTA agreement, when his focus changed from Milk to auto-mobiles. Trump proposed that imposing tariffs on auto imports might move forward discussions, stating that it would be “the big one, the motherlode.”

Canada’s automotive industry accounted for 6.3% of the worlds car exports in 2017, that contributed approximately $46 billion to the Canadian economy which is roughly 115 times more than the country made on milk exports in 2017.

New tariffs from the United States could spark a war of taxation, said John Reis, senior associate dean of the economics program at UBC. What is lost in our exports would likely be matched by tariffs on American imports into the country, in an effort to make up for lost revenue. A clash like this could push a new NAFTA signing further away from fruition, said Ries, and if a 25% percent tariff was imposed, it would definitely reduce the amount of business Canada could sustain in the auto sector. General motors, Ford, Honda, Toyota and Chrysler all base their Canadian auto fabrication out of Ontario, and in turn the impact would be felt more in that province than in B.C.

Ries says Trumps announcement could be an attempt to gain an upper hand in negotiations. Canada isn’t completely helpless in the discussions though, as Trump and his party will seek positive NAFTA news before the November six midterm elections, and thus far Prime Minister Trudeau has continued to stand his ground.

John Ries, UBC economist comments on what the immediate impact of tariffs could bring