Alongside threatening to annex the Panama Canal and buy Greenland, Donald Trump is defending his proposed 25-percent tariff against Canada. The soon-to-be-again president stated last week that we didn’t need cars produced north of the border. However, effectively cutting off Canada’s automotive industry would hurt American manufacturers, workers and drivers.
The purported “The Art of The Deal” author loves a hefty tariff. In lieu of a physical wall, Trump wants to build an economic wall against Mexico with Americans paying for it. In March 2024, he threw out the idea of a 100-percent tariff on Chinese cars built south of the border. By October, it became a 2,000-percent tariff on all vehicles built in Mexico.
Trump has shifted his focus northward, especially after Justin Trudeau announced he was stepping down as Canadian Prime Minister. He was asked about a tariff against Canada during a Mar-a-Lago press conference last week, NPR reported. He answered:
“In trade deficits, we’re losing massive – we don’t need their cars. You know, they make 20 percent of our cars. We don’t need that. I’d rather make them in Detroit. We don’t need the cars. We don’t need their lumber.”
It’s incredibly reductive to believe that a tariff would simply shift where cars are built. The automotive industry operates in a global market where cars are both built and sold across borders. Canada is a vital component of the North American market as the largest buyer of US-built auto parts. Industry expert Sam Fiorani told Automotive News Canada:
“The automakers will likely absorb some of the tariff in the short term, but a high tariff on Canadian-built products, especially popular and important models like the RAV4 and Civic, will ultimately raise their prices. A 25-per-cent tariff imposed in the first quarter will cause price increases before the end of the year. They simply can’t find U.S. capacity to make up for Canadian production immediately.”
Customers aren’t willing to tolerate the short-term price increase. If a tariff is imposed, production of some models could eventually shift to the United States. However, automakers would rather spend the money lobbying to keep the status quo than wait years to build new assembly planes and hire the necessary workforce.
