It won’t just be the automotive industry that gets a short break on U.S. tariffs, the White House has announced that it will pause its levy on more Canadian goods. However, the threat of a blanket 25 per cent tariff on Canadian and Mexican goods entering the U.S. is not gone, as President Trump says the levies will be imposed on those countries on April 2.
The White House went ahead with a previously delayed plan to impose tariffs on its two closest neighbours on Tuesday, only to push them back a month for the automotive sector the following day. Now, another day later, more products are being exempted from the unprovoked levy.
Unfortunately, the latest announcement is vague, and it remains unclear exactly which products will and won’t be subject to tariffs. The Associated Press reported that an unnamed White House source said that only products compliant with the Canada, U.S., Mexico Agreement (CUSMA) will be exempt from the levy, meaning that as many as 62 per cent of Canadian exports to the U.S. will still face the surcharge. Canada's response has not yet been announced at time of writing.
Regardless, the pause is cold comfort for Canadian companies. Lana Payne, the president of Unifor, the union that represents auto workers employed by Detroit’s Big Three automakers and numerous auto parts suppliers, described this trade war as “the fight of our lives.”
“This entire industry is at risk, our plants, our jobs, everything that you have fought to achieve for years,” said Payne at an emergency joint meeting with the Independent Parts Suppliers Council today. “Our members have been living under economic warfare by the President of the United States.”
In a statement, Unifor said that a temporary pause is insufficient, and that the union is pushing for a “full and unequivocal lifting of these unjust, punitive, and illegal tariffs on all Canadian goods.”
While the threat of levies affects the entire Canadian economy (not to mention the American and Mexican economies), automakers and parts suppliers are particularly susceptible to them. Given the historically strong trade relationship between the U.S., Canada, and Mexico, goods move across their borders multiple times before resulting in a complete vehicle. The speed and strictures of modern manufacturing also mean that parts makers operate on slim margins.
According to the Automotive Parts Manufacturer’s Association (APMA), a 25 per cent tariff on auto parts would cause Canadian parts plants to have to shut down in a matter of weeks. By some estimates, the combination of U.S. tariffs and Canadian counter tariffs could cause the price of vehicles to rise by an average of as much as $6,000 for consumers.
Unfortunately, a 30-day pause on tariffs does not offer companies much time to react and shield themselves against the worst effects of this trade war. It also does little reassure investors, leading the share prices to remain low.
