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A tit-for-tat automotive trade war between Canada and the United States would raise prices of new vehicles by between $5,000 and $9,000 and put nearly one-fifth of jobs at auto dealerships in Canada at risk, the Canadian Automobile Dealers Association warns.

The association examined the impact of the 25-per-cent tariff on vehicle imports the Trump administration is studying amid trade battles with Canada, Mexico and the European Union that began with a levy of that amount on steel imported into the United States from those and other countries as well as members of the EU.

“That [tariff] or anything close to it would be catastrophic for not only the Canadian automotive industry, but for the economy as a whole,” CADA said in its analysis. As Canada responded to U.S. tariffs on Canadian steel and aluminum with 25 per cent and 10 per cent duties, respectively, on U.S. metals, it is expected to match any U.S. tariffs on Canadian vehicles and parts with levies on U.S. vehicle and parts imports.

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“A 25-per-cent tariff on our automotive exports to the U.S. could be enough to send our entire economy into recession if they are applied for any length of time,” CADA said, although it noted that U.S. consumers will bear the highest costs of tariffs.

The average transaction price for vehicles sold in Canada was $38,374 in 2016 and a large percentage of the vehicles sold here are manufactured in U.S. assembly plants.

That includes the Ford F-Series pickup, the best-selling vehicle in Canada, the Jeep line of sport utility vehicles and crossover sold by Fiat Chrysler Automobiles NV, the Chevrolet Volt made by General Motors Co. and popular mid-sized cars, such as the Accord and Camry sold by Honda Motor Co. Ltd. and Toyota Motor Corp., respectively.

“Vehicles directly impacted by the tariff would increase in price almost immediately,” CADA said. “Those not impacted directly would likely face upward price pressures as the tariff compromises the supply of vehicles across the board.”

The worst-case scenario of matching 25 per cent duties by the United States and Canada would put between 25,000 and 30,000 of the 156,000 jobs at new-vehicle dealers at risk, CADA estimates.

Canadian car dealers now employ more people than vehicle, truck and parts manufacturing, which employed 134,000 people as of 2017.

The tariff analysis follows up on comments CADA president John White made at a House of Commons committee hearing last month. Mr. White said 25-per-cent tariffs on vehicles going across the border would cause a “tsunami-like downturn” that would be worse for the auto sector in Canada than the 2008-2009 recession. Tens of thousands were laid off in the sector during that crisis and some assembly plants were shut for months.

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The group stopped short of urging the federal government to avoid retaliating in the auto sector if the Americans go ahead with a duty under section 232 of the 1962 Trade Expansion Act.

But if Canada does respond that way, sales taxes should be eliminated on new vehicles; governments should offer “robust” incentives to drivers to scrap their older vehicles and buy new ones; and Ottawa should reform the personal and corporate tax structure to enhance Canadian competitiveness, CADA said. CADA represents about 3,000 new-vehicle dealers in Canada.

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