The North American auto sector could be the first of many industries devastated by the Canada-U.S. trade war.
Driving the news: Leaders from North America’s auto industry are warning that tariffs will force some auto plants to shut down production in the coming days.
- One head of a large auto parts supplier in Ontario with factories in Canada, Mexico, and the U.S. said she expects to “see vehicle production in North America grind to a halt” within a week. The president of Canada’s Automotive Parts Manufacturers’ Association echoed that claim.
Why it matters: The auto manufacturing industry directly employs around 125,000 people in Canada and more than a million in the U.S. — even a temporary shutdown will be highly damaging to both economies.
Why it’s happening: North America’s auto sector is tightly integrated, with thousands of parts going into each vehicle, many of which will cross a border up to 8 times before being assembled into the final product. As a result, tariffs are expected to cost the industry US$60 billion.
- Canada and Mexico produce 5.3 million vehicles per year, most of which are imported into the U.S, and tariffs will raise the cost of the average vehicle by around $3,000, according to analysis by Wolfe Research.
Bottom line: As one of the continent’s most tightly integrated sectors, the auto industry will be one of the first to feel the consequences of the trade war.—TS