Rising anxiety for Canadian auto suppliers over Trump tariff threats

The Ambassador Bridge

Commercial traffic crosses the Ambassador Bridge that links Detroit with Windsor, Canada. The bridge is the busiest crossing between the U.S. and Canada and links automakers and suppliers on both sides of the border.

Tariffs as high as 25 percent on vehicles and parts entering the United States could shut down North America's entire automotive industry, according to Flavio Volpe, president of the Automotive Parts Manufacturers' Association.

A 25 percent tariff, being threatened by U.S. President-elect Donald Trump, is so punitive and industry margins so thin that automakers and suppliers may simply halt production instead of booking losses, while turning to the courts for a resolution, he said.

"He picked the wrong number. It's so high that it's meaningless in automotive. … You may as well have said 200 [percent], said a million, no one's going to book those losses," Volpe said.

Anxiety among Canadian suppliers is growing as Trump dials up the rhetoric and prepares to retake the White House on Jan. 20, Volpe said, but in an industry with razor-thin inventories, the amount of pre-planning companies can undertake is limited.

Kevin Hallahan, vice president of marketing and investor relations at Linamar Corp., said the die casting company has prioritized getting U.S. orders filled ahead of the inauguration within its industrial division, but that automotive's just-in-time delivery model makes getting in front of tariffs infeasible.

The Guelph, Ontario-based supplier is engaged with the Canadian government to help work through the threat, and it remains confident the highly integrated nature of North America's auto sector will allow cooler heads to prevail, Hallahan said.

"The [automakers], they don't have real good switching abilities. If they selected a supplier to be the supplier of a particular powertrain component or structural component of the vehicle, there's been a lot of testing and validation on that before the vehicle reached its first day of production."

Trump's tariffs would‘hurt his own people'

The inability to quickly line up alternative local suppliers means the tariffs would hurt not only Canadian parts makers exporting to the United States, but raise prices for American automakers and American consumers, he added.

But with Trump seemingly willing to "hurt his own people" to advance his policy agenda, Canadian suppliers need to plan for the worst, said Jonathon Azzopardi, president of Laval Tool and Mould Ltd., a maker of compression and injection molds.

"We can never forget that there's a border. A lot of us like to think that the border doesn't exist, and we do everything we can to make it imaginary, but it is a reality," he said.

As with Linamar, Windsor, Ontario-based Laval Tool has no ability to fast-track U.S. orders to provide some short-term relief to the possible tariffs, but Azzopardi has begun contingency planning.

The company's U.S. customers will be saddled with the tariff, which means Laval Tool will need to "stomach" some of that cost to remain competitive with toolmakers south of the border eager to snap up their business, Azzopardi said.

"We're going to start taking haircuts," he said. "We're going to have no choice."

A 25 percent tariff will put the whole industry in the red, Azzopardi said, but at least for Laval Tool, profitability will take a back seat to holding onto customers.

"There's no way you can afford it and still be profitable. The question is, can you afford not to try and preserve relationships, to try and keep the supply chain moving," he said.

Canadian supplier growth at risk

The tariff threat puts a decade of growth at Canadian parts suppliers at risk, according to Brendan Sweeney, managing director of the Trillium Network for Advanced Manufacturing, which advocates on behalf of Ontario manufacturers.

Canadian parts manufacturers contributed C$10 billion (US$6.94 billion) to the country's gross domestic product in 2024, up from C$8 billion (US$5.5 billion) in 2014, according to a Trillium Network analysis released in December. Employment has also ramped up, growing to 80,450 jobs in 2024 from 69,985 a decade earlier.

The end markets for Canadian auto parts have remained largely consistent despite the growth, the Trillium Network found. Forty-three percent of parts were made for domestic assembly plants in 2023, while 55 percent were exported to the United States. Both figures are little changed from 2014.

The heavy reliance suppliers have on the United States makes the threat of tariffs "existential" north of the border, Sweeney said. But given the billions in auto parts going into American-made vehicles, "it's kind of existential for the U.S., too."

"It's all pretty silly and ham-handed, and if it happens everyone's in trouble, for no good reason," Sweeney added.

Despite the anxiety created by the threats, the auto industry can take some comfort in having gone through Trump's wringer before and coming out the other side, said APMA's Volpe.

Suppliers and government are dusting off their playbooks from 2019, when NAFTA was reworked into the United States-Canada-Mexico Agreement during the first Trump administration, he said.

With the USMCA up for renewal in 2026, the latest threats are not wholly unexpected, Hallahan added. While it is impossible to predict how the coming weeks will play out, Trump already has commitments from Canada on defense and border security, he added.

"In that regard, he's already got a win in terms of the acknowledgement of doing more to get to better results on those two issues," Hallahan said.

Trump threatened shortly after his election in November to impose tariffs on Canada on his first day in office.

In reality, Volpe said, Canada will likely have 60-90 days to formulate a response as federal departments act on the new president's executive order.

* Source : https://www.plasticsnews.com/news/trump-tariff-threats-prompt-rising-anxiety-among-canadian-auto-suppliers