Will Trump tariffs spell curtains for the Canadian auto industry?
The automotive industries of many countries will be severely impacted by Donald Trump’s punitive tariffs on imports of steel and aluminium to the United States. One nation which might suffer more than most is Canada. Following the recent G7 meeting, Trump announced - by Twitter, of course - that he would also be imposing a 25% tariff on auto imports from his northern neighbour. The last ten years have not been happy ones for the Canadian automotive industry. The recession of 2008 hit Canada hard. Windsor, Ontario, a small city just across the Detroit river from the U.S., has long been synonymous with a once-thriving auto industry. General Motors, Ford and Chrysler all had manufacturing facilities there. Since 2010, however, GM has ceased its Windsor operations and Ford now has only two engine plants in the city, albeit employing some 2,300 workers. The city’s largest employer today is Fiat Chrysler Automobiles with around 6,000 workers. Now, its future must also be in doubt if Trump implements his threat.
The importance of the U.S. market to Canada’s automotive sector should not be overstated. In 2016, 96% of the country’s vehicle exports went to its southern neighbour. Add in the 90% of total exported automotive parts which also crossed the border and you get an idea of how significant the U.S. market is to the Canadian auto sector. In the province of Ontario, over 140,000 people rely on the sector for their livelihoods, directly or indirectly. I was in Windsor a couple of months ago and saw for myself just how critical auto manufacturing is to the city’s continued well-being. Although the city fathers are making efforts to diversify into other industries, the FCA and Ford facilities are the generators of Windsor’s life blood.
When OEMs make future planning decisions, it doesn’t happen overnight. Usually, these critical decisions are taken years in advance. The same holds good for the United Kingdom which is still mired in Brexit uncertainty. In a highly competitive industry such as automotive, it would take a massive leap of faith for an OEM to commit to continued production when the future horizon is obscured by storm clouds. Just last week, BMW’s Ian Robertson issued a warning regarding the future of the carmaker’s MINI plant in Oxford if a no-deal Brexit came into being. The same thoughts must be troubling many of Canada’s automotive companies. Think again Mr. Trump.
Simon Duval Smith
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