Impact of Tariffs on Canada-US Auto Trade
At the World Economic Forum, President Trump's tough stance on Canada's role in car production could have detrimental effects on the auto industry and consumers.
Integrated Auto Sector
Canada and Mexico play a significant role in the highly integrated North American auto sector. Tariffs on Canadian-made cars and parts would have "deepest negative impacts" due to the interconnected supply chain.
US Automakers Affected
Canada supplies approximately 10% of cars sold in the US. Bringing this production to the US would require an estimated six new plants, adding billions in costs.
Consumer Consequences
Tariffs could raise average US retail car prices by $3,000. Retaliation from Canada and Mexico would compound the economic consequences, leading to collapsing demand.
Full On-shoring Prohibitive
Full relocation of non-US production to the US would require a 75% boost in US production and $50 billion in investment.
Auto Parts and Components
Tariffs would also affect the flow of auto parts and components, forcing US automakers to source from alternative countries with higher costs.
Aluminum Impact
Aluminum producer Alcoa warns that tariffs on Canadian aluminum could cause higher prices, ultimately impacting auto parts and aerospace.
Economic Outlook
The report underscores the economic pain tariffs would inflict on both sides of the border, including higher production costs, job losses, and increased consumer expenses.