Canada will retaliate if U.S. President Donald Trump follows through on his threat to impose 25-per-cent tariffs on imported vehicles and auto parts, with Ottawa prepared to hit American autos with matching levies.
Kirsten Hillman, Canada’s deputy ambassador to the United States, delivered this warning on Thursday at a U.S. Commerce Department hearing in Washington, where U.S. officials were gathering input on Mr. Trump’s proposed tariffs.
“Should this investigation ultimately result in the application of tariffs on autos, Canada will … be forced to respond in a proportional manner,” she said.
Such a move would intensify the bruising trade war between Canada and its largest commercial partner, and could send the economy into recession.
The Trump administration last month hit Canada and a host of other countries with tariffs on steel and aluminum imports, and Canada responded with levies on a long list of American goods. Earlier this week, the United States announced an investigation that could lead to tariffs on imported uranium, 25 per cent of which comes from Canada. The two countries are also locked in a stalled renegotiation of the North American free-trade agreement, with the United States demanding a slew of protectionist changes.
The Mexican government announced on Thursday that Canadian Foreign Minister Chrystia Freeland will lead a delegation to Mexico City next week to meet with the Mexican President, president-elect and other officials. The move is a bid to thwart a U.S. plan to cut a NAFTA deal with Mexico alone in an effort to push Ottawa into making concessions at the bargaining table.
Ms. Hillman also criticized Mr. Trump’s ostensible reason for the tariffs: The administration is citing an obscure trade rule that allows the president to impose tariffs to protect national security.
“You are being asked to examine ... automobiles and auto parts. Not tanks. Not battleships,” she said. “Where’s the nexus between civilian vehicles and national security? There is none.”
Two-way trade in vehicles and parts between Canada and the United States amounts to $140-billion annually, with 85 per cent of Canadian vehicles and 50 per cent of parts exported to the United States.
The Canadian Automobile Dealers Association warned earlier this month that a tariff war between the two countries could wipe out 100,000 manufacturing jobs and trigger a recession. The United States, meanwhile, would see soaring vehicle prices, two million lost sales and 700,000 lost jobs at car companies, parts makers and dealerships, according to the Center for Automotive Research.
Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada, said some industry players might balk at Canada retaliating against the United States. But he said Ottawa must fight back. “In these affairs, you’re either a lion or its lunch, and I’m not sure that walking softly will keep you out of its mouth,” he said.
Jerry Dias, head of Unifor, the union that represents Canadian autoworkers, said retaliation would be necessary to push U.S. workers to lobby the Trump administration to change its mind. “The only thing Trump will understand, I would argue, is if auto workers and auto parts workers in the United States start to scream very loudly,” Mr. Dias said.
Mark Nantais, president of the Canadian Vehicle Manufacturers Association – which represents the Canadian units of Ford Motor Co. and General Motors Co., based in Detroit, and Italy-based Fiat Chrysler Automobiles NV – was more muted on the prospect of Canada retaliating. The CVMA will work with the government to avoid outcomes that “could undermine automotive investments, competitiveness and the thousands of jobs generated by the auto industry in Canada,” he said.
The American auto industry descended en masse at the hearing on Thursday to plead with the Trump administration not to impose tariffs. Dozens of executives warned trade action would hurt the United States just as much as it would other countries. The industry that makes specialty parts for hot rods to supe-up their rides even dispatched a lobbyist. So did classic car collector companies and firms that supply parts to auto body shops.
“A lot of Alabamians – my friends and neighbours – could lose their jobs," said John Hall, a maintenance worker at a Hyundai plant in the state’s capital, Montgomery.
Jennifer Thomas of the Alliance of Automobile Manufacturers estimated Americans would end up paying up to US$6,000 more for a vehicle. “Simply put, auto tariffs are a massive tax on consumers,” she said.
One U.S. industry source with knowledge of the administration’s thinking said Mr. Trump is angling to make a decision on auto tariffs by early fall, giving himself the option to impose them before midterm elections in November.
Meanwhile, federal and provincial politicians, and industry leaders will continue their outreach campaign to persuade Americans to put pressure on Mr. Trump to spare Canada.
“They have a lot to lose,” Ontario Economic Development Minister Jim Wilson, who testified alongside Ms. Hillman, said afterward in summing up Canada’s message to the United States. “You’re not elected to hurt your own people.”