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Trump team says border tax plan for imported vehicles includes Canada

President-elect Donald Trump stands with vice president-elect Mike Pence at a news conference at Trump Tower on Jan. 11, 2017, in New York City.

Spencer Platt/Getty Images

The incoming Trump administration has uttered the word Canadian auto industry executives have been dreading, saying a tax on vehicles imported into the United States could be applied to Canada.

A border tax will apply "when a company that's in the U.S. moves to a place, whether it's Canada or Mexico or any other country seeking to put U.S. workers at a disadvantage," Sean Spicer, a spokesman for president-elect Donald Trump, said during a conference call with reporters Friday, Bloomberg News reported.

Until Friday, the name Canada had not arisen specifically in comments by the administration on auto exports or in the tweets Mr. Trump has sent out threatening to impose a "big border tax" on General Motors Co. and Toyota Motor Corp. for importing vehicles to the United States from Mexico.

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Those Twitter comments and Mr. Trump's promise to tear up NAFTA have created upheaval among auto companies and parts suppliers – and have allowed Mr. Trump to steal the spotlight this week from the shiny new metal at the North American International Auto Show, the annual gala in Detroit where auto makers show off their latest offerings.

Mr. Trump's target so far has been Mexico; he did not single out Canada or any auto makers operating in this country in his tweets. But Canadian industry officials did not expect to stay off the radar. "I was just wondering when this would come," said Ray Tanguay, an automotive adviser to the Ontario and federal governments, when informed of Mr. Spicer's comments Friday.

Foreign Affairs Minister Chrystia Freeland's office said it is in talks with Trump staff on the matter and noted there is significant opposition to a border tax within the United States.

"We have a constructive working relationship with the Trump transition team, and discussions are ongoing," said Joseph Pickerill, Ms. Freeland's director of communications. "This particular proposal is something that has been floated for quite some time and is opposed by at least as many American lawmakers as support it, but at this stage, we are going to continue to work with the incoming administration on the interconnectedness and to the mutual benefit of our two economies."

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The five auto makers that assemble vehicles in Canada exported about $60-billion worth of cars, crossovers and minivans to the United States last year.

In the past four months, four of them have announced investments totalling more than $2-billion at their Canadian plants, including a $400-million investment announced Monday by Honda Motor Co. Ltd., at its assembly plant in Alliston, Ont.

The subject of how the auto industry in Canada should respond to Mr. Trump's threats and the potential dismantling of the North American free-trade agreement was under discussion at a meeting in Detroit this week of the Canadian Automotive Partnership Council, a joint industry-union group set up to advise the government.

Mr. Tanguay updated the group, which includes the CEOs of all five auto makers, on a report he is writing that will offer recommendations to governments on how Canada can attract new automotive investment.

To head off border taxes on Canadian exports, industry leaders need to explain how closely integrated the auto industry is in Canada, the U.S. and Mexico – and how U.S. interests would be hurt if such taxes were imposed, Mr. Tanguay said Friday.

While Canada has a trade surplus with the U.S. on finished vehicles, it runs a deficit of about $11-billion on parts because of the high value of parts that auto makers in Canada import from U.S. suppliers. Canadian industry officials need to lobby the governors of such states as Michigan, Ohio and Indiana – the sources of many of those parts – so they can lobby the new administration, Mr. Tanguay said.

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"Those guys, I think, are going to be a voice of reason," said Rob Wildeboer, executive chairman of Toronto-based Martinrea International Inc., Canada's third-largest auto parts maker.

Mexico also imports billions of dollars' worth of U.S. parts for cars assembled there, Mr. Wildeboer said.

While Mr. Trump and administration officials have singled out auto makers that are shifting production to Mexico or elsewhere, none of the companies is shutting a U.S. plant in order to open one elsewhere.

Globe Talks: The Canadian economy under Trump. Join us on Jan. 19 for a live event. Get tickets here.

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