U.S. Tariffs Squeeze Canada’s Auto, Steel, and Aluminum Industries

The impact of U.S. tariffs is resonating across Canada, particularly in the auto, steel, and aluminum sectors. While U.S. President Donald Trump has recently lowered tariffs on certain grocery items, Canadian industries continue to feel the strain from ongoing trade policies. The rising cost of goods and anticipated job cuts are prompting Canadians to reassess their economic landscape as they navigate these challenges.

Flavio Volpe, a member of the Council on Canada-U.S. Relations and president of the Automotive Parts Manufacturer’s Association, highlighted the shifting perception among Americans regarding tariffs. He noted that many are beginning to understand that tariffs function as consumption taxes, which could increase pressure on Trump to make further adjustments. “When his treasury secretary is spending the week saying we’re going to give everybody $2,000 back, then they kind of lose the argument that tariffs don’t raise prices,” Volpe said during an interview with CTV News Channel.

Canadian Industries at Risk

The ramifications of U.S. tariffs are particularly acute for Canada’s automotive industry, where approximately 85 percent of Canadian-made vehicles are exported to the United States. With the imposition of a 25 percent tariff, American consumers face significantly higher costs for these vehicles, leading to a marked decrease in purchases. Volpe reported that this has resulted in a 25 to 30 percent drop in demand for Canadian automotive products this year, placing numerous jobs at risk.

Canada’s trade relationship with the U.S. is substantial, with Canadian companies importing $100 billion worth of vehicles and parts annually. “We are putting the same kind of pain on our counterparts in the U.S. Midwest and the U.S. Southeast,” Volpe explained, emphasizing the widespread impact of tariffs. This economic strain extends beyond the auto sector, affecting steel mills and aluminum smelters that supply essential materials.

The situation is especially critical in Ontario, where major automotive companies have announced significant operational changes. In October 2023, Stellantis revealed plans to relocate production of its Jeep Compass from Brampton, Ontario, to Illinois. This decision followed a prior suspension of operations at the Brampton plant in February due to the tariffs. Additionally, General Motors announced the cessation of electric delivery van production at its Ingersoll, Ontario, facility.

Job Losses and Future Strategies

Volpe pointed out that each closure of a car plant can affect up to 10,000 jobs, encompassing both automaker employees and those in the supply chain. With trade negotiations stalled between Canada and the U.S., there seems to be little incentive for the U.S. to revisit these discussions. “Until that changes, Canada will have to increase its focus on what it can do for itself,” Volpe stated. He emphasized the need for Canada to take control of its economic future, even though this approach may not completely compensate for the loss of its largest export market.

As Canadian industries grapple with the ongoing challenges posed by U.S. tariffs, the focus will need to shift towards innovative strategies that bolster economic resilience. The situation underscores the interconnectedness of North American economies and the potential consequences of trade policies on both sides of the border.