People in the auto industry on both sides of the border between Detroit and Windsor are worried as President Donald Trump pursues new tariffs on Canada.
On Saturday, the Trump administration announced a 25% tariff increase on nearly all imports from both Mexico and Canada. Canada responded with plans for a 25% retaliatory tariff on some goods from the United States. Though tariffs could have an impact on a wide range of goods, the auto industry is likely to be particularly squeezed by them. On Monday, both Mexican and Canadian officials announced they had reached a deal with Trump's administration to delay tariffs by 30 days.
Almost 20% of American cars are produced in Michigan, leaving consumers to brace for higher prices and manufacturers worried. Before final assembly, cars and car parts can go back and forth from Michigan and Ontario, across the Detroit River several times.
The trade relationship between the United States and Canada has been built over decades, and runs through Detroit and Windsor. In 1994, the implementation of the North American Free Trade Agreement caused cross-border trading between the United States and Canada to boom. The Ambassador Bridge over the Detroit River is the busiest international trading location in North America.
The short term impact of a tariff-centric policy is difficult to predict, according to Glenn Stevens, executive director at MichAuto with the Detroit Regional Chamber.
“It takes thousands of components to build a vehicle and it only takes one critical component to prevent that vehicle from being built or delivered to the showroom,” Stevens said.
In the long run, Stevens expects input costs to “take a hit,” eventually impacting consumers while affecting demands and jobs, if the tariffs take effect.
That's bad for the automotive industry, said Dennis Darby, president and CEO of Canadian Manufacturers and Exporters.
“When somebody suddenly decides to disrupt this trade relationship, Canadians take it badly on a personal level, but certainly incredibly disruptive for industry," Darby said, describing the automotive sector as "a big piece of the pie."
Darby expects the auto industry to suffer if a trade war takes hold.
“I think the whole North American auto industry has a potential to slow down while trying to figure this out. And I think for Canada, it's probably obviously more important, because as a percentage of our output, more goes to the U.S. than the U.S. comes to Canada.”
These conversations were recorded early on Monday, before Prime Minister Justin Trudeau announced the plan for a 30-day delay on tariffs.
GUESTS ON TODAY’S SHOW:
- Dennis Darby, President and CEO of Canadian Manufacturers and Exporters
- Glenn Stevens, Executive Director, MichAuto
