The Current - Trump wants to shut down Canada’s auto sector. Can he do it?

Episode Date: April 3, 2025

U.S. President Donald Trump’s tariffs on Canada’s auto industry will lead to “mutually assured destruction,” says Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers Association. Kingston talks to guest host Mark Kelley about Trump’s stated aim of shutting down auto manufacturing in Canada, and why he thinks these tariffs ultimately leave the U.S. less competitive against rivals like China.

Scott Payne spent nearly two decades working undercover as a biker, a neo-Nazi, a drug dealer, and a killer. But his last big mission at the FBI was the wildest of all. I have never had to burn baubles. I have never had to burn an American flag. And I damn sure was never with a group of people that stole a goat, sacrificed it in a pagan ritual, and drank its blood. And I did all that in about three days with these guys. Listen to Agent Palehorse, the second season of White Hot Hate, available now. This is a CBC Podcast. Hi, it's Mark Kelly here.

You might know me from my regular gig as co-host of the CBC's The Fifth Estate. You'll be hearing more from me when I fill in for Matt as he crosses the country talking to Canadians about the election. I hope you tune in and please enjoy the current podcast. Donald Trump was calling it Economic Independence Day at a game show style press conference in the White House Rose Garden. He unveiled a chart listing the tariff rates his government is imposing on countries around the world. Indonesia, Malaysia, Cambodia, oh look at Cambodia, 97 percent.

We're going to bring it down to 49. They made a fortune with the United States of America. United Kingdom, 10 percent. And we'll go 10 percent. Canada was largely spared additional tariffs, but as expected, a 25 percent tariff on auto imports did take effect. Prime Minister Mark Carney spoke in Ottawa yesterday shortly after the announcement. President Trump has just announced a series of measures that are going to fundamentally change the international trading system. As of this evening, the tariffs on automobiles will enter into force

and the U.S. has signaled that there will be additional tariffs in so-called strategic sectors. We are going to fight, we are going to protect our workers, and we are going to build the strongest economy. Brian Kingston is president and CEO of the Canadian Vehicle Manufacturers Association, whose members include Stellantis, Ford, and GM in Canada. Brian, good morning.

Good morning. Take me back to yesterday, just listening to Trump again, I was watching what some would call a spectacle in the Rose Garden yesterday. He's talking about people's livelihoods. You know this better than anyone in the Canadian auto sector. What was it like for you to watch this show yesterday? Well, it's deeply concerning. We were hoping that there would be an off-ramp for the tariffs on the

automotive sector and obviously we're concerned about what the announcement would mean for the existing tariffs that had been announced. Was the US going to go forward with additional stackable tariffs on Canadian auto? We thankfully avoided that, but we have effectively gone back in time. We have not seen tariffs at these levels since 1910. This is protectionism to the maximum, and this is going to have a massive negative economic impact on not just Canada, but the world. Well, let's start unpacking that, especially what the effects here in Canada, that we've already know Windsor assembly plant will be shut down for two weeks

with more changes expected. What are you bracing for? What do you know is going to happen here? Well, we know that when tariffs increase, it effectively drives costs through the automotive supply chain. So the result is it will become more expensive to build vehicles in North America. We are estimating that new vehicle prices will go up anywhere from $4,700 US dollars to $10,000. Wow. That means that consumers, their purchasing power when they want to go buy a new vehicle will decline significantly. So demand for new vehicles will go down.

You will see increased demand for used vehicles as we saw during the COVID pandemic when there was a semiconductor shortage that's going to drive those prices up. And ultimately this means lower vehicle production levels across North America. That will have an impact on jobs. It will have an impact on investment in this sector, and it will ultimately make North American manufacturers less competitive with the world. We have been competitive because we operate from a North American platform that has just been undercut.

Marc Thiessen Donald Trump has said that one of his goals is to, quote, permanently shut down the automobile manufacturing business in Canada, end quote. Do you see that day coming? No. And for a simple reason, it's not feasible. It is simply not feasible to do this. The Americans build about 10 million vehicles annually.

They import 16 million vehicles, and some of that comes from Canada, Mexico and other parts of the world. To try an onshore, a highly sophisticated supply chain would take years and cost tens of billions of dollars. In the meantime, you would have devastation across the North American supply chain. Costs would go up significantly for consumers. I am not convinced that the American consumer has signed up for this and realizes what this will cost them. And yet, he's doing it.

I hear what you're saying, Brian, and I've heard other people coming out and saying, you know, this will take time, it's going to cost money, it's going to blow a hole in the whole auto manufacturing sector, and yet he's still going ahead with it. So what is it that, you know, he knows that we don't seem to know? Well, you know, I think it's ultimately going to be the economy and the markets that pull this back. We're looking at forecasts that are estimating the US economy is going to contract by over a percent.

It's going to put at risk 900,000 jobs in the manufacturing sector alone. These are huge economic impacts, which I don't think are sustainable. And to do this, to actually try and onshore the entirety of the supply chain, just replacing Canadian production, you know, you need to build five, six assembly plants. This will take years to do this. It's not realistic, and I ultimately think that will be the disciplining factor in this policy. The Ford CEO, Jim Farley, has warned about the dire consequences to the industry. It was in February when he told analysts, quote, let's be real honest, long term, a 25% tariff across Mexico and Canada borders will blow a hole in the US industry that we've

never seen before." Where are the CEOs in this conversation? You represent these companies. Where are they coming out publicly saying what you are saying? They've been very vocal in the past few weeks and deeply engaged with the US administration making the case in particular for our free trade agreement which we just negotiated with the Americans five years ago the USMCA or Kuzma. Signed by Donald Trump. Signed by Donald Trump and lauded as the best free trade agreement ever negotiated. This agreement required higher levels of

North American content in vehicles and as a result in Canada if you look at a vehicle that rolls off an assembly plant we have extremely high levels of North American content in vehicles and as a result in Canada if you look at a vehicle that rolls off an assembly plant we have extremely high levels of North American content and over half of the parts and components in those vehicles are actually American. And the relationship now as a result between Canada and the US and auto overwhelmingly benefits the United States. The US has a trade surplus in automotive with Canada. They send more vehicles to Canada than any other market in the world. So this case has been made and progress has been achieved. We saw in the executive order there is a reference to the USMCA. I do think there is a

chance to continue to push for the continued integration of this North American market and that's what the companies are doing right now. And you mentioned auto parts. In May, the US says additional duties will be introduced for the auto manufacturing sector. So what effect will that have on the cost of auto parts? This will have a major impact. So we're fortunate in the sense that Canada,

because of our high level of integration with the US, the 25% tariff will only apply to the non-US parts and components in a vehicle. So compared to other jurisdictions around the world, Canada is actually relatively better off. We still are facing tariffs, but not as high as say Germany or another auto manufacturing country. Where this gets extremely challenging is on the auto parts side. If the Americans go forward with extremely challenging is on the auto parts side. If the Americans go forward with additional tariffs on auto parts, we'd be facing a situation of tariff escalation. What I mean by that is a part used in a North American vehicle can cross the border numerous times, four, five, six times before it is installed into a finished vehicle. Is that part going to

be tariffed every single time it moves across the border? If so, you won't just be seeing a 25% fee on that part. It could be significantly higher by the time it is installed in a vehicle. So that's why, you know, when I talk about the estimate of vehicle prices going up by $10,000, that's what gets us there. And it could be even higher depending on how broad this is applied. Mark Carney said Canada can sustain the auto industry with the US tariffs in place as long as government and industry work together to retool and rethink how Canada makes vehicles. What does that future look like? Very challenging. The reality of this industry really going back to the 60s in the auto pact, it has been designed on a north-south

basis. Over 90% of what we build here goes to the United States. And the reason for that is that that allows for companies to achieve economies of scale. This is a business that doesn't have high margins. So manufacturers can be competitive when they can produce at volume and send into the broader North American market. If we start to divvy that up, it becomes very challenging for a manufacturer to have a facility in Canada that would just service Canada. That really doesn't make any business sense.

Definitely doesn't make economic sense. So I don't want to get to that point. I think we have to find a path with the Americans. That is really the foundation of this sector and that should be the number one objective right now. Is there any kind of market for Canadian-made cars in other countries besides, beyond the United States? No, and this is one of the challenges that we have. North America is a unique market, and North Americans like to drive larger vehicles, of course pickup trucks are extremely popular as are larger SUVs.

So the North American market in a way is self-contained. A lot of what is produced here isn't exported to Europe or Asia and frankly given shipping costs generally you want to put your manufacturing assembly facility as close to possible as possible to the final consumer. So diversification isn't really an option for this sector. You know, uncertainty, it just undermines business, it undermines consumer confidence. I mean, there's an uncertainty is what we're dealing with. How what how do you brace for this right now?

You're talking about investments that would need to be made that would cost billions of dollars, that would take years to implement. But are you in a position right now where you have to start drawing up those plans to say, well, if the tariffs stay in place, we're going to have to do this, whether we like it or not? Yeah, I mean, auto manufacturers are world renowned for having extremely efficient supply chains and contingency planning to the max. Right.

We've just come through the COVID pandemic with the semiconductor shortage, which caused all sorts of challenges for the supply chain. So they're very good at planning for all scenarios. But to your point about the uncertainty, I mean, since the USMCA was signed, that created a set of rules that manufacturers understood would be what dictates trade in North America.

But Donald Trump doesn't seem to care about those rules. Exactly. And so what we saw is that there was over $288 billion in new automotive investment announced since 2020, the majority of that, into the United States. Now the rules have changed and frankly they keep changing on it seems like almost a daily basis. So how is a company do you invest and think about an auto assembly plant, I mean auto manufacturers have been in Canada for a hundred and twenty years when they make an investment this is a long-term

commitment. How do you invest in an environment where the policy framework changes almost by the minute? So this is going to freeze investment. Nobody will be considering major new investments in this environment because you just can't have certainty that this policy of the United States will remain consistent. So what are you, or what do you want to ask our governments to do to help cushion the impact of these tariffs on workers and in your business? Well, first of all, I mean, we have to make sure that we've got supports for workers as these disruptions ripple through the supply chain. So if people are being laid off or if there are shift reductions throughout the supply chain, just making sure that we have a well-funded EI system and people are supported in this transition.

That cannot be a long-term policy. Our number one ask of government is to find a way to get to the table with the Americans and work on a path forward. That is fundamental. I don't want to contemplate a scenario where we do not have access to the U.S. market because it is so devastating. If you had the ear of President Trump right now, imagine that, what would you say to him? You could sit down if he were listening right now.

Well, I can't help myself. I'm an economist. I always go back to the data, and I realize that sometimes that doesn't appear to to get the attention it deserves but the relationship benefits America. It benefits America more than anybody else and ultimately if the US wants to compete with other automotive jurisdictions, China in particular, China is going to have enough capacity by the end of this decade to satisfy 75% of global vehicle

demand. You cannot compete with China with one hand tied behind your back. And that's what the Americans are doing by cutting out Canada, their strongest ally, their strongest trading partners. So this is a, it's a mutually assured destruction if they go down this path.

We want to compete and win. The industry is transitioning to electrification right now. Canada is the perfect partner. We have every mineral required for advanced EV batteries. Without Canada, you can't win in that transition. So I would hope that those arguments would win the day, but it doesn't appear to be getting the attention it deserves so far. So far. Well, let's hope some US policymakers are listening. Brian, I appreciate your time this morning. Thanks so much. Thank you.

Brian Kingston is President and CEO of the Canadian Vehicle Manufacturers Association, whose members include Stellantis, Ford and GM in Canada.