Trump's tariffs would devastate auto sector, raise consumer costs: industry leader

Auto industry leaders say U.S. president-elect Donald Trump's threat of tariffs on Canadian goods would have devastating effects for the sector, forcing both Canadian and U.S. consumers to pay higher vehicle prices.

Flavio Volpe, president of the Automotive Parts Manufacturers' Association, said it's unreasonable to apply such a tax to vehicle parts, which may cross the border up to eight times before ending up in a finished vehicle

He noted the auto industry works with single-digit profit margins.

"A tariff of 25 per cent is like talking about purple unicorns," said Volpe in an interview.

"I think we need to ignore the number, because cars would cease to be made by American companies if that came into effect."

Trump sparked backlash among Canadian business and political leaders after posting to Truth Social on Monday that he will sign an executive order imposing a 25 per cent tariff on all products coming to the United States from Canada and Mexico.

The incoming president said such a tariff would remain in place until Canada and Mexico stop drugs and people from illegally crossing the borders.

Global Automakers of Canada president and CEO David Adams said his organization had "obvious concerns" about the announcement.

"A 25 per cent tariff on all imports from Canada -- the largest trading partner of the United States -- will negatively impact jobs and livelihoods on both sides of the border across a number of key sectors of our economies. This would also be the case for the automotive industry," said Adams in a statement.

"In our view, Canada must act swiftly and firmly to make the case that the U.S. and Canada are stronger and more competitive when we face the global challenges together, not apart."

Volpe said any cross-border tax would increase the cost of components and raw materials that go back and forth between the neighbouring countries. That would lead to a slowdown in production and a supply shortage, prompting higher prices for customers at dealerships.

"Everybody would feel it," he said.

"First, the American consumer would feel it. But it wouldn't take too long before it would be shared by everybody, meaning everybody in Canada and Mexico as well."

During the U.S. election campaign, Trump had promised to introduce a universal 10 per cent tariff on all American imports -- a pledge that would reduce the size of the Canadian economy by around one per cent, resulting in $30 billion per year in economic costs, according to previous modelling by the Canadian Chamber of Commerce.

But asked if he would consider any tariff level digestible for the Canadian auto sector, Volpe replied, "Zero is the maximum."

"It's simply because we've built this auto sector together," said Volpe.

This report by The Canadian Press was first published on Nov. 27, 2024