Auto manufacturing industry to ask for 'trade assistance' if tariffs are imposed

While automotive leaders testify in Washington, urging politicians to scrap Trump's proposed tariffs on imported vehicles, two industry insiders warn any duties would pinch both countries immediately.

Auto insider says manufacturing in Canada, U.S. would 'grind to halt' in 30 days if Trump tariffs pass

Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association, says tariffs on vehicles imported to the U.S. would send the industry into a halt on both sides of the border. (Geoff Robins/Canadian Press)

"You're probably looking at 30 days."

That's how long it would take before production "grinds to a halt" at automotive assembly plants, parts manufacturers, and other industry businesses on both sides of the border if U.S. President Donald Trump's proposed 25 per cent tariffs on all imported vehicles comes to be. 

That timeframe is according to Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association. Volpe told CBC Radio's Windsor Morning that dealers would feel the squeeze right away, before it trickles down to affect all manufacturing. 

"Dealers might make five to 10 per cent on a car. If they start underwater, they won't take the inventory," he said. "If they don't take the inventory, you will see manufacturing halt on this side of the border."

And Jonathan Azzopardi, chairman of the Canadian Association of Mold Makers, would agree. 

"Dealers will stop buying Canadian-made vehicles," he said and the country will be forced to increase sales to Europe or Asia. But eventually that will "start to dry up" because the factories were put in place to ship south of the border -- not overseas, adds Azzopardi.

It will mean "a slow death" for Canada's auto manufacturing industry, he said.

Most of the parts used to build the Canadian cars are imported into Canada from the U.S., effectively hurting both countries. 

There is ideology and populism and then there's sheer madness of sending your country into a recession to prove a point no one understands,- Flavio Volpe, president, Automotive Parts Manufacturers' Association

"Every single auto state in the U.S. would be tripped into recession — that's seven or eight major states plus Ontario. For absolutely no reason at all," said ​Volpe.

Volpe, like many others, are watching closely as auto industry leaders descend on Washington to urge politicians not to impose the tariffs. 

The discussions come after Trump's administration announced they were considering imposing tariffs on all imported vehicles.

On Thursday, the U.S. Commerce Department will hear from experts on both sides of the debate, including representatives from Ontario and Canadian federal governments. After the hearing, the department will decide on whether to recommend tariffs to the president. 

Volpe is closely watching the talks happening in Washington, as industry leaders make a case to scrap the proposed tariffs. (CBC)

If the tariffs go through, Azzopardi said the auto manufacturing industry will need to get "trade assistance" from the federal government.

"We are innocent bystanders in this trade agreement, so we're looking for [trade assistance] until things level out," he said. The existing steel and aluminum tariffs are already affecting his industry and without that assistance, he said the the industry slow-down will only happen quicker.

Volpe said even Republican senators, such as Orrin Hatch, have criticized Trump's policy.

"I'd love to hear who is for these tariffs, certainly no one who has any interest in prosperity even on the U.S. side," he said.

That's certainly a part of the Donald Trump playbook which is to go into an issue hard and negotiate,- Sandy Baruah, president/CEO of the Detroit Regional Chamber

"There is ideology and populism and then there's sheer madness of sending your country into a recession to prove a point no one understands," said Volpe. 

"We are equally as concerned as our friends and partners in Canada are," said Sandy Baruah, president and CEO of the Detroit Regional Chamber.

"We don't see much of a silver lining in any of this activity."

How much would a car cost?

Like Volpe, Baruah sees the immediate impact a 25 per cent auto tariff would mean on sales. 

"Take for example the vehicle with the highest U.S. parts content — which happens to be the Toyota Camry of all cars — you'd think the vehicle with the most U.S. content would not be impacted by these tariffs but you would be sorely mistaken," said Baruah. 

Akio Toyoda, President and member of the board of directors at Toyota, introduces the all-new 2018 Camry at the North American International Auto Show on January 9, 2017 in Detroit, Michigan. Baruah said the car has the most U.S. made content - but still the price would sky-rocket if tariffs are imposed. (Scott Olson/Getty Images)

"Because the parts that go into a Toyota Camry, just like any other U.S.-made vehicle, roughly 25 to 35 per cent of those parts come from other countries."

Baruah said the price of the Camry, for example, would go up about $2,000 - $3,000 overnight. 

It's about trade at the heart

Baruah is also concerned about the barrier the tariff would create on one of the busiest trade borders in North America — between Detroit and Windsor, Ont.

Sandy Baruah, president and CEO of the Detroit Regional Chamber sees no silver lining to Trump's proposed auto tariffs. (Detroit Regional Chamber)

"If that border is stymied because of tariffs or other kinds of barriers — as we saw after 9/11 because we had a physical barrier on the border — the economy of both sides are going to suffer greatly," said Baruah.

"And it's going to be the people — the workers — that are going to pay the price."

With NAFTA on Trump's chopping block amid an international trade war, some speculate the auto tariffs are a push by the president to reach a better deal.

"That's certainly a part of the Donald Trump playbook which is to go into an issue hard and negotiate," said Baruah. 

Mike Jenner is the plant manager at Laval International, a tool and mold company based in Windsor, Ont. Jenner also believes this latest tariff imposition is a strong front from Trump.

"I think that's his last kick at the can before he sits down and negotiates truly," he said. Jenner has worked in the industry for 34 years and these auto tariffs are "uncharted water."

Mike Jenner, who's worked in the auto manufacturing industry for 34 years, believes Trump's proposed auto tariffs are a NAFTA negotiating tactic. (Meg Roberts/CBC)

He wants to see the federal government to sit down with Trump to "get a deal done" already. 

"Personally I believe this will come to an end, and I hope it's brief."

Baruah urges that imposing tariffs on Canadian vehicles is not the way to stimulate more manufacturing in the U.S.

He said many auto companies will be hesitant to invest in the country if they find themselves in the middle of the mess, and ultimately many products won't come into the market if it's not profitable. 

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