U.S. President Donald Trump has laid sweeping tariffs on the world’s automotive industry to strengthen the production of U.S. cars, but one industry expert says that based on how the supply chain works, there’s really no such thing.
“Anywhere from four to eight times, a part could go back and forth (across the border) before it is installed into a finished vehicle,” said Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, in an interview with CTV Your Morning Friday.
“The way I like to think about it is there really isn’t anything considered a Canadian car or a U.S. car; it’s a North American vehicle.”
Earlier this week, amid a staggering and globe-spanning list of tariffs that largely avoided Canada, the Trump administration announced new levies of 25 per cent on non-U.S. vehicles. As a result, Prime Minister Mark Carney announced a 25 per cent tariff on U.S. auto imports to match.
Tariffs between Canada and the U.S. are blunted in part by the Canada-U.S.-Mexico Trade Agreement (CUSMA), with some levies limited only to products that are not in compliance with the trade deal’s rules.
Carney told reporters Thursday that Canadian tariffs will exclude auto parts, “because we know the benefits of our integrated production system.”
Kingston says North America has a deeply integrated cross-border supply chain; one that would be very difficult to disentangle.
“A Canadian-built vehicle will have so much U.S. content in it that you could say it’s a jointly built vehicle, because it is so highly integrated,” he said. “That’s how the industry works.”
Assuming tariffs were to apply every time a given car crossed the border during the production process, manufacturers face a cash flow problem, because the revenue to pay upfront for those tariffs comes after the car is built and sold.
Kingston says that problem will lead to higher prices, lower demand and, ultimately, fewer new cars.
“Everybody, including auto-parts suppliers, are going to see bigger costs,” he said. “This industry does not have significant margins; you cannot continue to operate with a 25 per cent tax throughout your supply chain.”
The Canadian government has announced a slate of supports for autoworkers and companies, including waiving waiting periods, expanding access and suspending severance restrictions for employment insurance, deferring corporate income tax and GST/HST remittance deadlines and bringing forward new funding for regional development agencies.
“Importantly, every single dollar raised from those counter-tariffs, which could reach around $8 billion before remission, will go directly to our autoworkers and the companies affected by those tariffs,” Carney told reporters Thursday.
The challenge for Ottawa, Kingston notes, is to respond to U.S. tariffs without unintentionally adding to the strain on Canadian manufacturers.
“The last thing we want to do is damage manufacturers who are already under fire from the U.S.,” he told CTV. “If we then hurt the vehicles that they sell in Canada, it will be doubly damaging.”
Ultimately, he says the trade relationship with the United States remains vital.
“Our objective here is really to ensure that we can find a way to continue to trade with the U.S.,” he said. “If we cannot access the U.S. market, where 90 per cent of the vehicles Canada builds go to, there is no support program that will keep this industry moving forward.”
With files from CTV News’ Spencer Van Dyk
