July 10, 2018

Canadian Auto Dealers: Vehicle Tariffs Will Send Nation’s Economy Into Recession

On July 6, the Canadian Automobile Dealers Association (CADA) released an analysis, currently available on its homepage, outlining how U.S. President Donald Trump’s proposed 25 percent tariffs on auto imports would affect the Canadian auto industry and the nation’s broader economy. The CADA noted more than 80 percent of Canadian automotive production, or two million vehicles a year, eventually makes its way to the United States. It found:

  • Consumers would pay $5,000 to $9,000 more per automobile.
  • More than 100,000 manufacturing jobs would be at “immediate” risk and “indirect job losses at dealerships and elsewhere would drive this number much higher.”
  • The economic impact would be felt most acutely in Ontario since 40 percent of the province’s exports are from the automotive sector.

The CADA concluded, “A 25 percent 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.”

The organization made several recommendations if the United States moves forward with the threatened tariffs. They include: enacting a sales tax exemption for new vehicle sales; creating a vehicle scrappage program to encourage drivers to retire older vehicles; and immediately instituting a suite of personal and corporate tax reforms to improve Canadian competitiveness.

As a reminder, the Metals Service Center Institute (MSCI) has repeatedly argued, in its comments to the Trump administration on the North American Free Trade Agreement (NAFTA) and elsewhere, that the United States and Canada are well-integrated and enjoy a mutually beneficial trading relationship. Specifically, in its NAFTA comments, MSCI said, “Through NAFTA the North American automobile industry, which is heavy with metal content, has developed into a modern, multi-billion dollar, tri-partite, cross border cooperative dependent on the movements of parts and semi-finished vehicles across all our borders.”

The comments noted, “A typical auto part, for example, crosses the U.S.-Canadian border seven times before it is part of a finished vehicle” and concluded “NAFTA has nurtured a broad and vigorous advanced manufacturing supply chain producing intermediate parts across North America. These supply chains have contributed to the growth of the manufacturing sector in the U.S., creating higher paying and higher skilled jobs.”