MNI INTERVIEW: Tariffs Add Up To USD12,000 To Car Prices- Exec

Tariffs will raise the price of Canadian-built vehicles sold in the United States by as much as USD12,000 and prices will be permanently higher if Donald Trump succeeds in moving production to American factories, Global Automakers Canada President David Adams told MNI, adding that continued tensions also boost odds of a recession in Canada.

“It could be anywhere in the neighborhood of about USD2,500 per vehicle up to about USD11,000 or USD12,000 per vehicle depending on whether you're talking about a small car, luxury car, SUV, pickup truck,” he said. 

While Canadian automakers moved as much product as possible to the U.S. prior to tariffs, Adams said price hikes will be seen once that inventory runs out. Canada's weak dollar is also raising costs for producers sourcing parts from the U.S., he said.

Extra costs go beyond the short-term tariff jump, Adams said. Building cars solely in America removes efficiencies of an integrated North American industry, and producers also rely on foreign high-tech parts and critical minerals. His group represents producers such as Honda and Toyota that have assembly sites in Ontario. 

PARTS FROM WHERE?

“More and more of the parts and components that are going into vehicles tend to be electronic parts," he said. "Even an internal combustion engine vehicle is increasingly becoming highly computerized and a lot of those parts and components frankly aren't made anywhere in North America. They're made in Southeast Asia or somewhere else.”

"If we just accept the president's premise and say let's repatriate all the vehicle manufacturing the reality is when you do that vehicles built in the U.S. will become more expensive," he said. "The U.S. is at full employment right at the moment and I know right now the auto industry is struggling to find workers so I'm not sure if you're going to put another 12 or 13 plants in the United States where you would find the workforce."

Shifting tariff policies are already hurting the U.S. and Canadian economies, he said. "Everybody is just to a certain extent hitting the pause button and saying we're not doing anything until the dust settles,” he said. Adding to the confusion are indications U.S. customs agents will be overwhelmed and unable to return any extra tariff money collected from businesses. 

“The longer this volatile tariff environment goes on and the longer tariffs are in place the more likely I think we could be heading to a recession,” Adams said about a potential downturn in Canada.

U.S.-CHINA ANTE

There's still some reason to expect auto factories will remain in Canada given the major investments already in place and American leaders who see China as the biggest trade offender, he said.

"My two manufacturing members have been in Canada since the mid-1980s. Over that time they've invested tens of billions of dollars. Those are significant capital investments and nobody's going to make a decision lightly on doing anything except preserving that footprint and sort of carrying on," Adams said. 

Canada’s next move should be focusing on dialogue after its April 28 election because the U.S. appears to want a new trade relationship outside USMCA, Adams said. “The U.S. administration does seem to be more intent on trying to do bilaterals with countries as opposed to renegotiating the USMCA.”

While Canada must diversify exports there's some chance other nations will see it as a more reliable place to invest, Adams said. “You can have sort of a chaotic protectionist environment that you could invest in south of the border or you have an opportunity to invest in Canada that's seen as a little bit more stable, a little bit more friendly.” (See MNI: Canada Must Spend On Tariff Fight, New Markets-Farmers)