Trade war truce? Not so fast. Trump has Canada’s auto sector in his sights

One trade war down, two to go — maybe more. U.S. President Donald Trump has dialled back his tariffs against Canada after rattling the economy from the markets, to factories, to the borders.

But that was this week’s battle.

There’s another one next week when his steel and aluminum tariffs take effect; then another three weeks after that, when Trump is threatening other tariffs on a multitude of countries.

Private and public comments in recent days from Trump’s team make a mockery of the idea that stopping fentanyl was the principal reason for his tariff policy.

The biggest risk for Canada is now coming into focus. And it’s bad news if you’re one of the hundreds of thousands (new window) of Canadians with a job connected to the auto sector. His target may be you.

In closed-door conversation, members of Trump’s team have been pushing auto companies in recent days to commit to drastically scaling back their long-term footprints in Canada and Mexico in exchange for permanent tariff relief — without success so far, according to three sources connected to the industry, who spoke on condition they not be named.

WATCH | Tariffs delayed again:

Trump pauses tariffs for 1 month on some Canadian, Mexican goods

President Donald Trump said Thursday he is pausing his tariffs on some goods from Canada and Mexico that fall under the Canada-U.S.-Mexico-Agreement until April 2.

Team Trump has gone nearly that far in public.

His press secretary Karoline Leavitt, asked for her message to car companies fearful of tariffs that are due as soon as April, said: Shift production here.

Commerce Secretary Howard Lutnick on Fox News made the same point:

Why are our Michigan [auto] jobs in Canada? he asked. [Trump’s] going to say, ‘Come on back. Come on back.’

Trump himself described conversations he’d had this week with the Big Three U.S. automakers, saying he’d promised a brief reprieve from the previous and so-called fentanyl tariffs to allow them to plan.

But he warned there would be no exemption from future tariffs.

I told them, ‘That’s it. This was a short-term deal,’ Trump said Thursday, as he signed an order in the Oval Office, retreating from his initial tariff salvo.

I said… ‘Don’t come back to me after April 2,’ Trump said of the automakers. ‘I don’t want to hear from you after April 2.’

Most Canadian-made vehicles are exported (new window) to the U.S., and Canada sells more vehicles than it buys. But the industry isn’t a one-way street: Canada is the biggest buyer of U.S.-made cars, and parts criss-cross the border.

What’s coming next

Trump is now threatening tariffs in two phases.

First, there’s a 25 per cent levy coming next week on steel (new window) and aluminum (new window), and the car industry will be poring over the fine print for exemptions, as those metals are their main components. Without exemptions, vehicles would face punishing price increases.

Then he’s planning tariffs on countries around the world to punish alleged unfair trade practices — starting as early as April 2. This is based on reports he’s ordered his team (new window) to prepare, which are due April 1.

Trump made clear Thursday that he views Canada as among the main targets. He’s gearing up for a bruising renegotiation of the Canada-U.S.-Mexico Agreement. By law that must happen over the next decade, but is now expected on an accelerated timetable.

Trump has complained about everything from Canada’s protected dairy sector, to banking regulations, to the GST. Dairy came up frequently in a tense and profanity-riddled phone call this week with Prime Minister Justin Trudeau.

Will Trump back down again?

He swears he wasn’t spooked this week by the river of red splashed across trading screens, representing losses on the stock market.

I’m not even looking at the market, Trump insisted.

WATCH | A ‘colourful’ conversation:

Trudeau says call with Trump on tariffs was ‘colourful’ but also ‘substantive (new window)

Prime Minister Justin Trudeau, speaking at a child-care announcement on Thursday in Ottawa, was asked to describe his recent call with U.S. President Donald Trump about tariffs. Trudeau, who didn’t provide specifics, stressed that conversations are ongoing and reiterated that Canada is focusing on how to help people cope while the levies are in place.

What chaos looks like

The market, however, was looking at the economy. And it’s getting messy out there. Customs brokers had a unique vantage point into the real-world impact.

Jesse Mitchell, the Ottawa-based director of business development for Strader-Ferris International, which works with hundreds of cross-border companies, says companies were walloped with unexpected bills — $50,000, $75,000 and $100,000; some because their shipments reached the border later than expected, past midnight on Tuesday, when the tariffs kicked in.

In other cases they weren’t aware they’d owe a tariff. For example, Mitchell cited one Canadian company that fixes heavy machines.

He said that company would import the motor, charge $50,000 for repairs and ship it back to the U.S. — and only realized belatedly that they’d have to pay another 25 per cent of that bill to send it back across the border.

Canadian companies had no choice. Many were paying the tariff, he says, to avoid losing their U.S. customer.

In the face of that, Mitchell says, companies on both sides were holding back shipments — assuming, hoping, that Trump would back down quickly.

He has, to some extent. Trump has dropped tariffs on goods deemed compliant with the Canada-U.S.-Mexico Agreement, which does not cover disputed areas like lumber, dairy and certain other products. Even there, the details aren’t clear.

It’s causing headaches for everybody — certainly in Canada but also probably in the United States, said Mitchell.

Seeing the chaos approaching, companies rushed to ship goods before Tuesday.

Merchandise exports to the U.S. skyrocketed from November to January, a trend the Bank of Montreal linked Thursday to the tariffs, as well as the battered loonie.

The Canadian Chamber of Commerce said Thursday’s reprieve will mitigate some damage. But not nearly all of it.

This is not a moment to celebrate. The economy is not a toy to play with, Matthew Holmes, the chamber’s vice-president, said in a statement.

Constant threats and economic uncertainty have taken their toll. We see it in delayed business investments, shaky consumer confidence, stalled capital flows, and a volatile stock market. People’s livelihoods are at stake.

For Canada, those livelihoods exist in numerous sectors. Canada’s tens of thousands of steel workers may feel it next week, not to mention the far bigger auto sector.

The economy may not be a game. But workers will be forced to play it — round, after round, after round.

This article is republished from RCI.