Here’s how the U.S. tariff threat would impact Canada’s auto industry

A general view of production along the production line is shown during a tour of a Honda manufacturing plant in Alliston, Ont., Wednesday, Apr. 5, 2023. (THE CANADIAN PRESS/Cole Burston)

The Canadian automotive industry is in preparation mode as the U.S. considers imposing a 25 per cent tariff on all imports — including vehicles and their parts — from Canada and Mexico as early as February.

This move has sent shockwaves through the Canadian auto sector, prompting urgent discussions about potential impacts and contingency plans.

David Adams, CEO of Global Automakers of Canada told CTV News Channel in an interview Wednesday that the tariff threat is a serious matter that demands immediate attention.

“Nobody wins in a tariff war,” Adams said, highlighting that both Americans and Canadians would suffer if the tariffs are implemented.

The situation is further complicated by the timing of the tariff threat. While U.S. federal agencies have been tasked with reviewing trade relations and are set to report back in April, the proposed 25 per cent tariff could be implemented as soon as February.

And while Adams suggests it may be a “negotiating lever” to pressure Canada and Mexico into making concessions in trade negotiations, he emphasized the need to prepare for all scenarios, such as early renegotiations for the Canada-United States-Mexico Agreement (CUSMA).

Adams pointed to a recent Leger survey indicating that most Americans disapprove of tariffs and are concerned about their inflationary impact on goods.

“It’s hard to say exactly how that will ripple through the industry and then, in fact, the economy, but I anticipate it would be relatively quickly,” he said.

“People have been planning and trying to put contingency plans together for some time, but at the end of the day, you don’t know what you’re dealing with.”

One drastic option is the potential shutdown of production facilities if the tariff environment becomes too challenging, Adams said, adding that such a move would have devastating consequences for Canadian workers and the numerous businesses that rely on the automotive sector.

As the auto industry would be particularly vulnerable to such trade disruptions, their response to this challenge will be crucial in the coming weeks, he said.

“What we’ve been trying to do as an industry, and I think as a country, is prepare for the threats that are likely to be before us,” Adams said.