At the last minute, US tariffs were initially exposed to goods from Canada. The consequences would have been drastic, shows the example of the auto industry. Pressure on Trump would have come from the USA.
Unlike initially, US President Donald Trump will not raise new tariffs on goods from Canada and Mexico for the time being. After Mexico promised the stationing of 10,000 soldiers on the United States, Trump and Canada’s Prime Minister Trudeau announced in the late evening that they too agreed on closer cooperation at the border. However, the North American auto industry also played an important role in the defusing of the customs dispute.
A deal with Prime Minister Trudeau prevents the Commercial War between Canada and the United States at the last minute
Canadian suppliers know their value
Flavio Volpe is President of the Association of Canadian automotive suppliers. The companies, whose interests represent Volpe, would be most severely affected. Nevertheless, Volpe sees the trade conflict, which is now defused for 30 days. Already in Trump’s first term he negotiated with his ministers.
Canada’s economic strength is significantly smaller than that of the big brother in the south. But Volpe confidently says: The American auto industry is dependent on the Canadian suppliers. “Canadian suppliers operate 156 production locations in 19 US states, about half of them in Michigan,” he explains. Before the final assembly, individual auto parts would cross the border between the USA and Canada “up to seven or eight times”.
Customs would make cars significantly more expensive
The automotive industry across North America has been working across borders for decades and just-in-time, i.e. without large stocks. The parts are only delivered when they are needed.
Both the US car manufacturers and the Canadian supplier companies work with single-digit profit margins. Customs tariffs of 25 percent would result in auto parts on both sides of the border can only be produced with considerable losses. An average car would be 3,000 dollars, an SUV even 7,000 dollars more expensive, Volpe calculates.
“The North American auto industry would come to a standstill within a week,” he says, “and there would be complaints against the punitive tariffs.”
US industry would rebel
Not the Canadian suppliers would be the first to complain, emphasizes Volpe. But the large US car manufacturers General Motors, Ford and Chrysler. And the chances are not bad: Because Trump can only introduce the tariffs on the grounds that America’s national security is in danger. An argument that should hardly exist in court.
Volpe puts her finger in the wound: “How can General Motors, made in Toronto, be a national security risk for Michigan if half of the auto parts and 55 percent of the materials come from Michigan in this GM?”
What does Trump actually want?
The President of the Association of Canadian Automobile suppliers does not believe that Trump wants to risk such an embarrassment. This is also why Trump is now looking for a facial way out.
Trump’s actual goal – there is safe – are premature negotiations by the North American free trade agreement USMCA. Trump negotiated the agreement in 2018 and celebrated at the time as the best trade agreement in the world. A new negotiation is actually only planned for July 2026.
Trump wants immediate renegotiations. With the aim of increasing the US share of North American car production from currently 75 percent to 85 percent. In plain language: Trump wants to bring more jobs back to the USA in the auto industry.
