How Canada’s auto industry is ’on the ballot’ in today’s U.S. presidential election

As voters decide who will take over the White House, there’s a feeling the person who becomes U.S. president will bring in policies that could shift Canada’s role in the automotive industry.

Promises from both the Republican and Democratic parties to protect vehicle manufacturing in the United States and skepticism of North America’s free trade agreement have been central themes to the extensive campaign stops in Michigan.

The auto industry is on the ballot in 2024 like never before, said Patrick Anderson, who runs a consultant firm in Michigan that works with manufacturers on both sides of the border.

Anderson said there are two completely different visions for the future of the industry as pitched by Republican candidate and former president Donald Trump and the Democratic candidate, Vice-President Kamala Harris.

Trump says he plans to put a 10 per cent tariff on any product imported to the U.S. and it’s expected to apply to automotive suppliers across Ontario and Quebec.

Donald Trump is the most provocative president in decades in terms of threatening and using tariff policy to push other nations into more favourable terms of trade with the United States, said Anderson.

And this is certainly unsettling to close trading partners like Canada.

But experts don’t believe Trump will follow through on that pitch.

It would be catastrophic, but I don’t think it’s a real threat, said Flavio Volpe, who heads the Automotive Parts Manufacturers’ Association in Canada.

Volpe worked extensively on negotiations for the new free trade deal for North America and feels something can be negotiated through once again.

What Trump doesn’t understand, but the people around him do understand, is that tariffs are paid by the end customer.

Harris has been quiet on tariffs, spending much more time talking about her continued push to build electric vehicles (EVs) in the United States.

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How American voters can shape Canada’s automotive industry

As people vote in the United States during the presidential election, the CBC’s Chris Ensing looks at how American policies have shaped Canada’s automotive industry.

Inflation Reduction Act and its Canadian impact

Harris is expected to continue the current administration’s push toward EVs by supporting incentives to build them in North America.

Trump has said he plans to remove subsidies from the Inflaction Reduction Act (IRA) (new window) if he’s elected and has signalled a push to recommit America to vehicles powered by gas.

The IRA offers incentives to automakers who source materials from the United States and North America while building vehicles and batteries.

That includes the Advanced Manufacturing Production Credit, a tax incentive that allows manufacturers to claim up to $45 per kilowatt hour (kWh) of battery cell and module production.

Canada was forced to adopt this incentive after LG Energy Solution and Stellantis halted construction of its $5-billion battery plant in Windsor and demanded similar credits.

The government renegotiated a deal that could now see up to $15 billion in taxpayer-funded credits for the facility while securing 2,500 direct jobs.

It’s a direct example of how an anchor project for the country’s automotive industry can potentially be wooed to the United States.

Windsor battery plant keeps Canada ‘inside of the tent’

The facility recently announced it’s now producing modules, which is what holds the cells inside a battery. Experts say the timing couldn’t be better.

It’s important for us to make the argument that Canada’s inside of the tent, said Volpe.

He sees both Trump and Harris competing over who will better protect the U.S. from China, and says it’s a key moment for Canada to demonstrate its value in the integrated vehicle supply chain.

Volpe said the Windsor-based battery plant is a valuable part of the argument for Canada to be included in the United States’s automotive future. This is true whether Trump or Harris are leading the way.

If you’re not producing before that, you’re going to have to make more extensive arguments that ‘we’re going to be up and ready before they can build an alternative.’ This one is going.

Anderson said programs like the IRA push automakers to build vehicles that aren’t popular in the U.S. as companies announce layoffs due to underwhelming demand. (new window)

Certainly voters in Michigan are confronted immediately with the fact that the Democratic candidate has pushed policies that would force people to buy vehicles that by and large Americans are reluctant to purchase, said Anderson.

The policies he’s referring to are environmental standards that limit emissions on vehicles, something Trump has promised to get rid of while in office.

I can’t recall a time where it was that divisive and that in your face for workers in the auto industry.

U.S. taking a shift away from free trade

Another key piece of the campaign when it comes to the automotive industry is the candidates’ attitudes toward the Canada-U.S.-Mexico Agreement (CUSMA).

We’ve taken a clear turn, said Jonathon Hanson, a University of Michigan lecturer and political scientist.

Hanson said the IRA is an example of the U.S. pushing toward protectionism by subsidizing plants to build in the country and that the Biden administration has held on to tariffs that Trump’s administration initially imposed.

There’s been a big shift away from the notion of free trade that anchored policy decisions in the 1980s and ’90s, Hanson said.

The overall political climate has changed toward one where I think free trade does not carry the power that it used to. There is more of a nationalistic, buy American component to policymaking on both sides of the aisle in America.

Harris voted against CUSMA as a senator in 2020 and would lead a review of the deal in 2026 if she’s elected as president.

Brian Masse has been on the front lines of the shifting automotive industry as the long-serving NDP MP for Windsor West.

Masse said he’s been working with other MPs to highlight Canada’s role in the automotive industry to American counterparts.

It’s really difficult because you have to grab their attention, and often they don’t know the deft and value of what’s taking place, said Masse.

They’re more concerned obviously with politics on the southern border for example than the northern border, but their prosperity is really tied to us, too.

This article is republished from RCI.