Trump’s tariffs would hit Canada auto industry – consultant

TORONTO (ICIS)–US tariffs on imported cars and vehicles and the dismantlement of the North American Free Trade Agreement (NAFTA), as threatened by President-elect Donald Trump, would have “serious negative implications” for Canada’s auto sector, a Canadian auto consultant said on Wednesday.

Canada’s auto industry is “totally integrated” with the US since a 1965 “auto pact” between the countries, and US-Mexican auto sectors are similarly integrated under NAFTA since 1994, Dennis DesRosiers, president of consultants DesRosiers Automotive, said in a webcast media briefing on Canadian business television.

“To undo that would cause all kinds of inefficiencies, potentially a market collapse,” DesRosiers said.

“How do you unravel 50 years of [Canada-US] integration, how do you unravel duty-free shipment of thousands of components that it take to build a vehicle,” he asked.

Such an unravelling would “completely decimate” the structure of the North American auto sector, making vehicles significantly more costly and leading to a market collapse, he said.

The consultant added that it was not imaginable that the new president would want to trigger thousands of job losses, not just in Canada and Mexico, but also in the US. Still, Trump is unpredictable and there is a possibility of such a disaster happening, and “that’s why everybody should be worried about it”, he said.

DesRosiers also argued that this month’s investments announced by automakers for the US were hardly due to Trump.

“Those investments would have been announced anyway, maybe the timing has changed because of Trump” as the companies, by allowing the president-elect to claim credit, were trying to gain favour with the new US administration which will take office on Friday, 20 January, he said.

Even Ford’s decision this month to cancel a previously announced $1.6bn investment in Mexico was not driven by Trump’s threats of taxes or tariffs, the consultant said. Rather, Ford was responding to a shift in the auto market towards light trucks, away from the Ford Focus cars that would have been manufactured in the Mexican plant.

DesRosiers said that auto firms, in bringing forward announcements of investments they would have made anyway, were “calming the waters a little bit”. “Hopefully that kind of settles Trump down a little bit”, allowing for “saner views” to come to the forefront, he added.

Canada’s automotive industry, which is concentrated in southern Ontario, produces more than 2m vehicles per year, with much of the output being exported to the US. The big three Detroit auto giants, Ford, General Motors and Fiat-Chrysler, and some Japanese producers, have substantial operations in Canada, and about one in seven Canadian jobs depends directly or indirectly on the auto industry.

While there is no Canadian auto brand as such, Canada’s auto industry ranks as the eighth largest in the world, according to the country’s government.

The automotive industry is a major global consumer of petrochemicals which contributes more than a third of the raw material costs of an average vehicle. ICIS tracks the movement of petrochemical raw material costs in auto production both globally and regionally with the weighted ICIS Basket of Automotive Petrochemicals (IBAP).

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