As the United States gears up for another presidential election, Canada’s auto industry faces the possibility of a Donald Trump comeback. Despite an avalanche of legal troubles, the former U.S. president remains the top choice among Republican voters to lead their party in November 2024.
In late August, Trump vowed to impose massive new tariffs on all foreign goods — namely a 10-per-cent tax to help build a “ring around the U.S. economy.”
“When companies come in and they dump their products in the United States, they should pay, automatically, let’s say a 10-per-cent tax. ... I do like the 10 per cent for everybody,” Trump said in an interview with Fox News.
Trump’s penchant for protectionism is nothing new, and Canada’s political and auto industry leaders are well-trained in battling trade disputes with U.S. administrations of different political stripes, said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association (APMA).
“We’re going to always be fighting protectionism because it works to whip up votes south of the border,” Volpe said, citing the Joe Biden administration’s Inflation Reduction Act (IRA).
The legislation, which offers billions in tax credits for companies producing critical minerals and battery components in the United States, forced Canada to up its game over the competition for EV supply-chain investment.
Before the introduction of the IRA, Canadian lobbyists in Washington successfully fought attempts by the Biden administration to implement electric-vehicle rebates favouring U.S.-based automakers that employ unionized workers, Volpe noted.
“I think a lot of us, especially me, have assumed that this is the new normal,” he said.
But Trump tends to take his rhetoric up several notches, unleashing chaos and uncertainty. “Trade wars are good, and easy to win,” he tweeted in 2018.
During his time in the White House from 2017 to 2021, he imposed a 25-per-cent tariff on steel imports and a 10-per-cent levy on aluminum imports. Those had ripple effects throughout the automotive supply chain, boosting costs and squeezing parts makers.
In response, Canada imposed retaliatory tariffs against the United States.
When Trump’s administration renegotiated the North American Free Trade Agreement (NAFTA) into the United States-Mexico-Canada Agreement (USMCA), it brought significant changes to the automotive sector and earned Canadian negotiators their stripes when it came to protecting the nation’s interests.
Ideally, industry stakeholders should be working with government to formulate a just-in-case-Trump-wins strategy. Indeed, federal Foreign Minister Melanie Joly has said Ottawa is mulling a “game plan” in the event the U.S. takes an authoritarian turn next November.
In reality, Ottawa and industry stakeholders will have to await the outcome of next year’s presidential election, said Volpe.
“You can say you’re preparing, meaning that you might be emotionally preparing for a return of the chaos,” he said. “But you can’t do anything from a policy point of view before that.”