The automobile industry is one of the most integrated in North America, with thousands of parts crisscrossing the U.S.-Canada border every single day. American President Donald Trump’s tariffs are creating uncertainty.
Patrick Anderson, a U.S. auto industry expert working in Detroit, said a single vehicle is made up of hundreds of components that could each cross the border multiple times.
“You have parts that go into a piston. The piston goes back across into an engine, the engine goes back across into assembly plant and maybe the vehicle comes back across again,” he said.
Under the free trade agreement, none of that is taxed.
“But if we start having Canada say, ‘Oh, we’re going to tariff you and the U.S. says we’re going to tariff Canada, all of a sudden you could have tariffs compounding on tariffs,” said Anderson.
A study by JD Power and Associates shows it can lead to higher prices for consumers.
Robert Karwel of JD Power and Associates said it can bring the average car up to $5,000.
“It’s the 25 per cent each time it crosses the border. And as parts get more finished or in a greater state of completion, you can see how the costs start to escalate,” he said.
The tariffs went into effect with the rest of Trump’s sweeping tariffs on Tuesday, but on Wednesday, three major car makers – Ford, General Motors and Stellantis – were granted an exemption until the next round comes into effect on April 2.
Karwel says consumers won’t see prices rise until a few months later.
“We generally in Canada carry a 30 to 60 day supply of vehicles already,” he explained. “Those kind of have to make their way through the supply chain until consumers really start to get impacted.”
The impact on jobs on both sides of the border could come much faster.
“That’s not something that you could expect our consumers to just swallow on either side of the border. And that means inevitably, we would have job losses if these continue,” he said.
Both experts say it would take years for the industry to reorient its supply chains and have cars 100 per cent made in America.
