Auto sector hoping for tariff relief as tariff shutdowns loom

President of the Automotive Parts Manufacturers’ Association Flavio Volpe speaks to the media at the federal cabinet retreat in Montreal, Tuesday, Jan. 23, 2024. (THE CANADIAN PRESS/Christinne Muschi)

TORONTO — Canada’s auto sector is hoping for the tariff reprieve Mexico has secured as it faces a potential shutdown from the added border tax.

On Monday, Mexico secured a one-month delay in imposing the tariffs, while Canada still faces nearly blanket 25 per cent tariffs starting Tuesday.

Flavio Volpe, head of the Automotive Parts Manufacturers' Association, says he’s hoping Prime Minister Justin Trudeau can secure a delay on tariffs during a scheduled call with U.S. President Donald Trump on Monday afternoon.

“If he doesn’t, what we’re gonna see is probably an industry shutdown in about a week or so,” said Volpe, speaking at an auto parts manufacturer in Woodbridge, Ont.

“And then you’ll see a big assessment of what actual expenses you have as you’re carrying empty plants.”

He said that while the Ontario auto sector is raising immediate concerns, Trump will soon hear from U.S. citizens affected by the knock-on effects.

“If he causes it to shut down, he’ll hear from Alabamians and Tennesseans and Michiganders and Ohioans. You don’t have to hear what people from Ontario think after that.”

Sam Fiorani, an automotive expert at AutoForecast Solutions LLC, says the few days between when Trump confirmed the tariffs and when they’re coming into force means automakers have had little time to stock up on inventory.

“They normally operate just in time. So there’s just not a lot you can do to prepare yourself for a break in the supply chain.”

He says automakers Honda and Toyota would be especially affected by tariffs on U.S. imports as they produce a lot of their top-selling CRV and RAV4 vehicles from their Ontario plants and generally don’t hold deep inventories of vehicles.

“Removing the pipeline of those vehicles into the U.S. will cause a shortage of those models, those very popular and very profitable models in the U.S., in a relatively small period of time,” Fiorani said.

GM, Ford and Stellantis are is less vulnerable positions because they’re retooling several assembly plants while some of the vehicles they are producing are also made in the U.S. and Mexico.

Fiorani says automakers in general are hoping to see tariff relief, but have been doing what they can to prepare for the worst.

With files from Liam Casey in Woodbridge, Ont.

This report by The Canadian Press was first published Feb. 3, 2025