The Canadian Automobile Dealer Association says the average cost of a new vehicle would spike by as much as $9,000 if Canada retaliates against a 25 per cent auto import tariff in the United States.
U.S. President Donald Trump has suggested a 25 per cent on imported light-duty vehicles, and a 10 per cent tariff on auto parts.
"This — or anything close to it — would be catastrophic for not only the Canadian automotive industry but for the economy as a whole," CADA Chief Economist Michael Hatch said.
The association is urging the Canadian government to resist retaliation, but has some suggestions to offset the cost should Canada fight back with its own taxes.
The average transaction price of a new vehicle was close to $40,000 in 2016, and a large share of those vehicles came from the United States, the association said.
“In the event of retaliatory tariffs matching a 25 per cent levy by the U.S., the average consumer impact would be between $5,000 and $9,000,” the association said in a news release. “Vehicles directly impacted by the tariff would increase in price almost immediately (inventory is normally in the 60-day range). Those not impacted directly would likely face upward price pressures as the tariff compromises the supply of vehicles across the board.
CADA represents 3,200 Canadian car and truck dealers. New-vehicle dealers employ 156,000 Canadians in all regions of the country – the biggest and most geographically diverse employer in the Canadian auto sector, according to the association. It also estimates that 25,000-30,000 of those jobs would immediately be at risk in the worst-case scenario trade war between Canada and the United States. The association says 100,000 manufacturing jobs would also be at risk nationwide.
Hatch said indirect job losses at dealerships and elsewhere would drive the total number even higher. The impacts would be felt nationwide but particularly in Ontario, where 40 per cent of exports are in the automotive sector, the CADA noted.
In the event U.S. tariffs are implement, and if Canada continues its policy of retaliatory tariffs on U.S. imports into Canada, CADA suggests the following measures also be taken by the government to compensate affected industries and consumers:
- A sales tax exemption for new-vehicle sales to counter part of the steep tax hikes represented by retaliatory tariffs on Canadian consumers;
- A robust vehicle scrappage program to encourage drivers to retire older vehicles;
- An immediate suite of personal and corporate tax reforms aimed at enhancing Canada’s competitiveness.
Officials in the Trump Administration are looking into whether Canada-made vehicles pose a security threat and merit the tariffs. A decision could come as early as August.