TORONTO — The country’s largest auto suppliers have urged Canada and the United States to end their respective steel and aluminum tariffs, saying they were leading to rising costs throughout the auto industry. So far, the governments haven’t obliged and the main players appear to be taking it in stride.
The companies said the United States’ 25 per cent tariff on imported steel and 10 per cent tariff on imported aluminum, as well as Canada’s retaliatory tariffs, were manageable because much of their metal is sourced from within each country. Still, they said it was vital for lawmakers to end the tariffs because of the negative impact they have had on the industry as a whole.
Foreign Affairs Minister Chrystia Freeland says the tariffs contradict a key component of the new North American trade agreement — the pivotal section on autos — which will ultimately lead to the demise of the duties. But, they still exist — at least for now.
Linamar Corp. CEO Linda Hasenfratz warned in an August 2018 call with investors that the industry was dealing with “opportunistic” American companies that were “jacking their prices up” on steel. On the company’s third-quarter call in November, she echoed those concerns, saying automakers and suppliers in the United States were passing increased costs onto other suppliers, though she said the tariffs have so far had a “minimal impact” on earnings at Linamar, the second-largest Canada-based supplier.
“The impact to us is small, but the concern, of course, is that the impact is building in many American companies,” she said. “Pain is obviously building, so it’s imperative that these tariffs be dropped as soon as possible.”
The Washington-based Steel Manufacturers Association did not respond to repeated requests for comment from Automotive News Canada.
The tariffs were an ongoing concern for the industry, even after Canada, Mexico and the United States agreed to a new trade deal in September. Ford Motor Co. CEO Jim Hackett, for instance, said earlier this year that steel and aluminum tariffs would cost the automaker $1 billion.
MAGNA TAKES HIT
Magna International Inc., the largest Canadian auto supplier and third-largest global supplier when ranked by sales to automakers in 2017, said in a third-quarter filing that its earnings before interest and taxes took an $8-million hit related to new tariffs, $7 million of which impacted its body exteriors and structures business. Magna earlier this year anticipated an impact of about US $30 million ($39.3 million) in the second half of 2018 due to tariffs, though CFO Vince Galifi dismissed the steel and aluminum tariffs as “insignificant” to company earnings during the third quarter.
Martinrea International Inc. Chairman Rob Wildeboer, in an interview with Automotive News Canada, urged the federal government to lift its steel and aluminum tariffs, assuming the government believes the United States will eventually lift its own. He said the tariffs were primarily used as a negotiating tactic, and that they are unnecessary now that a trade deal has been reached.
“This was not meant to be a tax to raise revenue for the government,” he said. “It was meant to stand up to the Americans, and I think we did. I think the tariffs served their purpose, but at the end of the day, you don’t want to cut off your nose to spite your face.”