NAFTA negotiations took an ugly turn on May 24 after United States President Donald Trump lobbed criticism at Canada and threatened to impose tariffs on imported automobiles into the U.S. Trump directed Commerce secretary Wilbur Ross to initiate a Section 232 national-security investigation into imports of cars, trucks, and vehicle parts.
The threat may be yet another tactic in what has been a long negotiating process, it comes after the Trump administration extended steel and aluminum tariff relief on Canada and Mexico. This may be more evidence that the pressure is on the GOP to conclude NAFTA negotiations before the crucial November midterms.
Linamar Corp. (TSX:LNR), the second-largest auto parts manufacturer in Canada, saw its stock fall 1.83% on May 24. CEO Linda Hasenfratz called it “ludicrous” that imports from Canada and Mexico present a national-security risk. “This is clearly a negotiating tactic to draw to a close the ongoing NAFTA negotiations and other trade disputes,” she said on Thursday.
Shares of Magna International Inc. (TSX:MG)(NYSE:MGA), the largest auto parts manufacturer in Canada, dropped 0.93% on Thursday. The stock has surged 16.8% in 2018 on the back of record sales in consecutive quarters.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, pointed out that the majority of cars built in Canada are made by American manufactures with U.S. content. The Trump administration recently saw its bellicose rhetoric toward North Korea backfire and a war of words erupted between the nations, culminating in Trump scuttling the June summit. Time will tell whether or not this gambit will push NAFTA negotiations toward a swifter conclusion.
