In the wake of President-elect Donald Trump’s intentions to impose substantial tariffs on Canadian imports, there is a palpable sense of unease regarding the potential repercussions on the automotive industry in North America. This is particularly pressing for Ontario, which serves as the heart of Canada’s auto manufacturing sector. As the automotive trade between the U.S. and Canada has flourished in recent years, the looming tariffs could jeopardize the delicate balance that has supported thousands of jobs across both nations.
The core of the concern lies with Trump’s proposed 25% tariffs on vehicles and automotive parts. Ontario’s automotive landscape is somewhat dependent on exports, especially to the United States, where a significant portion of the light-duty vehicles produced—approximately 1.54 million last year—are directed. Local production facilities operated by major car manufacturers such as Ford, General Motors, Stellantis, Toyota, and Honda have leveraged their proximity to the U.S. marketplace. Any imposition of tariffs would threaten this symbiotic relationship and, alarmingly, could lead to skyrocketing costs for consumers, decrease production rates, and, in a worst-case scenario, massive job losses.
According to Doug Ford, the Premier of Ontario, the introduction of tariffs could be catastrophic. He articulated that the repercussions would extend beyond Canadian borders to affect American jobs as well. The intricate supply chains inherent in automotive manufacturing mean that parts frequently cross the Canada-U.S. border multiple times before final assembly. This interdependence signifies that tariff impacts could resonate throughout the economy on both sides of the border—not merely affecting the auto industry but also the broader labor market.
Currently—underpinned by longstanding trade agreements—Canada and the U.S. have enjoyed mutual economic benefits. Ford reflects this sentiment by emphasizing the existing trade dynamics: “We have a trade agreement right now. Things have been working.” His assertion underscores a preference for bilateral agreements rather than protectionist tariffs, which he argues would disrupt established trade routes and relationships.
In an increasingly interconnected global economy, Canada stands as the United States’ third-largest trading partner. The automotive industry serves as a prime example of this healthy economic relationship, with Canadian exports of auto parts reaching $23.5 billion and total vehicle exports at $53.5 billion in 2023. With the U.S. accounting for an overwhelming majority—95.3%—of Canadian auto exports, any tariffs would not only hamper a crucial trade flow but could also ignite inflationary pressures on vehicles sold within the U.S.
The question of how to mitigate these impending tariffs becomes vital for both Canadian and American stakeholders in the industry. Many industry leaders, including Flavio Volpe from the Canadian Automotive Parts Manufacturers’ Association, assert that tariffs should be kept at zero for a healthy automotive sector on both sides of the border. He warns that significant tariffs could dismantle the foundations of the industry, suggesting that the best course of action involves cooperation rather than division.
In light of the current political climate, Ontario has even launched a campaign to bolster its status as a pivotal trading ally with the U.S., in a bid to mitigate potential fallout from the proposed tariffs. This initiative is more than just an ad campaign; it represents a crucial affirmation of Ontario’s economic contributions and a strategic positioning of the region as a collaborator rather than a competitor.
The Canadian automotive industry, while rebounding from a decline exacerbated by the COVID-19 pandemic, remains in a state of precarious recovery. The industry has cautiously emerged from a nadir of 1.1 million vehicles produced in 2021 to a healthier but still vulnerable figure of 1.54 million in 2023. The ongoing evolution towards electric vehicles (EVs) has injected further uncertainty into the sector.
As David Adams, President of Global Automakers of Canada, acknowledges, while there have been improvements, the transition to EVs has proven slower than anticipated, leaving many manufacturers struggling to fill assembly lines effectively. The potential removal of EV subsidies by the new administration raises further challenges, making the industry’s future more unpredictable.
As both countries face the threat of economic disruption from tariffs, there exists an imperative for collaborative dialogue aimed at preserving the intricate linkages of the North American automotive trade. The suggestion by Doug Ford to fortify a cooperative stance against external pressures rather than imposing tariffs stands as a rallying call for industry leaders on both sides of the border. Achieving harmony in trade relations not only serves the interests of both nations but protects the livelihoods of countless workers reliant on a thriving automotive sector.