U.S. tariffs on Canada’s automotive industry could end up cutting the number of cars made in the country by nearly 1 million vehicles a year, according to a new report by bank CIBC.
If U.S. President Donald Trump follows through on his promise to impose a 25% tariff on Canadian automotive exports entering the U.S., it would lead to 900,000 fewer vehicles being made in Canada each year, says the report authored by Royce Mendes, a Senior Economist at CIBC Capital Markets.
President Trump has repeatedly threatened Canada with the possibility of imposing a 25% tariff on cars imported from Canada, along with a 10% tariff on auto parts after deciding against exempting Canada from hefty tariffs on steel and aluminum. Mr. Mendes estimates that if the U.S. imposed such tariffs, then that would result in the country's auto production falling by 900,000 units a year. But, if a U.S. auto tariff was imposed on all imported cars, and not just those from Canada, then production in the country could fall by more than 400,000 cars a year.
Canada produces more than two million new vehicles a year, according to Statistics Canada. That suggests that car production in the country would fall by roughly half if only Canada was targeted with a U.S. auto tariff, according to CIBC.
Last month, TD Bank warned that Trump's auto tariffs could cost Canada 160,000 jobs, especially if Canada retaliates as it has with tit-for-tat tariffs of its own. CIBC said in its new report that American consumers are better prepared to deal with an import tariff on cars because U.S.-made cars accounted for almost 80% of total cars sold in the country. In comparison, only about 10% of cars made in Canada are bought by Canadians.
