The U.S. President is not done with brandishing the threat of tariffs against his allies. After signing off on 25 percent tariffs on steel and aluminum, he is now threatening to cripple the North American auto industry by imposing tariffs of up to 100 percent on vehicles made in Canada.
In an interview with Fox on Monday, February 10, Donald Trump said that Canada has a “very great auto industry”, but claimed that it had been stolen from the United States. “They stole it because our citizens were asleep at the wheel,” he declared. And that's when he came to the threats.
“If we don't reach agreements with Canada, we will impose high tariffs on vehicles. It could be 50 percent or 100 percent, because we don't want their vehicles. We want them to be made in Detroit.
Ontario Premier Doug Ford responded quickly, pointing out that you simply can't push a button in the auto sector to dismantle supply chains that have been deeply integrated between Canada and the U.S. since the 1960s.
“Auto parts cross the border up to seven or eight times, before being assembled either in Michigan, another auto plant, or Ontario. That's the way it works, and it works well, and everyone benefits,” he told members of the U.S. Chamber of Commerce today.
Within the North American auto industry, reaction to recent events is equally negative. Ford CEO Jim Farley this week, Ford's CEO, sounded the alarm about the tariff threats and the plan to reverse measures taken by the Biden administration, which jeopardize jobs and investments at Ford's plants in Ohio, Michigan, Tennessee and Kentucky.
While being careful to paint the president’s intentions as good, Farley said his way of doing things was creating chaos and imposing significant costs.
“Let’s be real honest: Long-term, 25 percent tariffs across the Mexican and Canadian border would blow a hole in the U.S. industry that we have never seen. Frankly, it gives free rein to South Korean and Japanese and European companies that are bringing one and a half to 2 million vehicles into the U.S. that wouldn’t be subject to those Mexican and Canadian tariffs. It would be one of the biggest windfalls for those companies ever.”
- Ford CEO Jim Farley
It's hard to imagine 100 percent tariffs on Canadian-built vehicles. Such a situation would cause irreparable damage not only to the Canadian automotive industry, but to the American one as well, not to mention saddle American consumers with skyrocketing prices of certain models. Not to mention future relations between the two countries, which would be compromised, even more than they now are. As many, many analysts have pointed out, this is a game no one wins.
Time will tell if this is what it looks like, which is just another negotiating strategy.