Trump’s tariff threat raises concerns in Canada’s auto industry hub

Since 1988, the massive presses at Lanex Manufacturing on the edge of Windsor, Ontario, have been eliminating door jambs, split-seat latches, exhaust pipe hangers, tire supports and other tacky bits of metal that make their way into vehicles ranging from Corvettes To Corvette cars. Honda small cars.

But these days, concerns about the future are spreading through the plant as President-elect Donald J. Trump prepares to enter the White House. He threatened to impose a 25% tariff on all goods exported from Canada to the United States. In Windsor, this would destroy its lifeblood: cars and everything that goes into them.

“Everyone is waiting for the next shoe to drop,” said Bruce Lane, Lanx’s president, in a boardroom whose walls were made of painted concrete blocks. “If Windsor loses its auto business, Windsor will not be able to survive.”

Few Canadian cities are as fully aware of the importance of complementarity between the two countries’ economies as Windsor. The city is located directly across the Detroit River, and Canada’s maple leaf flag often flies next to the Stars and Stripes there. No industry has been so intertwined across borders since the automobile industry.

“These workers here in Windsor are more exposed to trade with the United States than anyone else,” Prime Minister Justin Trudeau said at a steel mill during a recent visit to the city.

He added that Mr. Trump “is proposing tariffs that would hurt not just people here in Windsor, but people across the country and indeed the United States.”

Detroit shares two major landmarks with Windsor: the $5.7 billion Gordie Howe International Bridge, scheduled to open this year, and the 96-year-old Ambassador Bridge, which moves about $300 million in cross-border commerce every day. Of Canada’s $440 billion in annual exports to the United States, only oil and gas generate a larger amount than exports of cars, trucks and auto parts.

But with Canadian officials taking Trump’s word that he will follow through on his tariff threat, Lin and others in the auto industry are already bracing for the potential fallout.

George Babb is the CEO of Babb Plastics, which is headquartered near the new suspension bridge. He said his American clients, especially automakers, would simply invoke the terms of the contracts he had with them and deduct the cost of the tariffs from the amount they paid him.

“Who’s going to take the hit?” Mr. Babb said. “Me, people like me, and companies like mine.”

Flavio Volpe, president of the Auto Parts Manufacturers Association, a Canadian trade group, estimated that most of his members had single-digit profit margins and that the tariffs Trump was threatening would be devastating.

The intertwining of the automobile industry between the two countries was cemented in 1965 when Canada and the United States reached an agreement that effectively eliminated borders for the industry. Today, 90 percent of cars and trucks made in Canada are sent to the United States, primarily by train.

At Lanex, small metal parts that few motorists will ever see are formed under pressure of up to 600 tons on the company’s presses. Their travels illustrate how intertwined the two countries’ auto industries have become.

As a small supplier, Mr. Lin does not deal directly with automakers but sells his goods through larger parts makers. The seat lock hooks that Lanex makes for Honda pickups are sent to a factory elsewhere in Ontario, where they are fitted with other parts and then shipped to an assembly line in Alabama belonging to Japanese company Honda.

Mr. Lin’s factory sent the parts to Michigan for heat treatment, brought them back to Windsor for further manufacturing and then sold them to an American company.

“Windsor is used to going back and forth across the border,” Mr. Lane said. “It’s like getting out of bed in the morning.”

The disruption caused by potential tariffs comes at an already difficult time for Canada’s auto industry. Many auto parts manufacturers have not seen their business return to pre-coronavirus pandemic levels due to lagging auto sales. In 2020, Lanex had about 60 employees working two shifts, but now has about twenty employees working one shift.

Concern is particularly acute in Windsor, which has a population of about 484,000. Aside from the cargo trucks that pass over the Ambassador Bridge, the city’s most visible automotive symbol is the giant Stellantis plant that produces Chrysler Pacifica minivans as well as the powerful Dodge Charger.

It is a city within the European city of Stellantis It employs 4,500 workers. With the help of billions of dollars in Canadian support, it is building a battery factory in a joint venture with South Korea’s LG in Windsor, and recently spent C$1.89 billion (about $1.3 billion) to retool its assembly plant to make electric cars alongside gasoline. -Supported.

But, like many automakers, Stellantis is now in a slump as it struggles to transition to electric vehicles and with competition from China.

James Stewart, president of the local union representing Stellantis workers in Windsor, said he doesn’t think the big tariff would necessarily deal a fatal blow to Stellantis’ operations in Windsor given the size of the company’s investment.

But with much of Windsor’s economic well-being closely tied to trade with the United States, Mr. Stewart said, tariffs would deal a heavy blow, including business closures, layoffs and production cuts.

“We are a suburb of Detroit. We’ve always felt that way,” he said, adding that Windsor seemed to be “being attacked for no reason.”

Initially, Trump described the tariffs as a way to get Canada and Mexico to better secure their borders to limit the flow of illegal immigrants.

But he also considered making Canada the 51st state, noting that the United States had invested heavily in Canada’s military defense and threatened to use economic force to annex it. He also spoke about what he described as Canada’s “support” by the United States, in an apparent reference to the US trade deficit with Canada, which is largely due to oil and gas imports.

The Trudeau government is expected to provide details How will he take revenge? Against any US tariffs on Monday, the day Trump takes office.

But Canada’s relatively small economy makes it difficult for the country to inflict significant economic damage on the United States, although tariffs on certain products could hurt individual states. Retaliatory tariffs would also push up prices in Canada.

Returning to the Lancs factory, Mr Lin said that by pure coincidence, the company had embarked on a “secret” manufacturing project unrelated to cars that had unexpectedly become a potential hedge against tariffs. He refused to provide any details to avoid notifying competitors.

Mr. Babb, the plastics company owner, said that although he opposed tariffs, which would hurt his company, he was a fan of Mr. Trump and understood why the president-elect said tariffs were necessary to help rebuild the industry. In the United States.

No matter what happens, Canada and the United States will always remain unwavering allies, Babb said.

“You cannot separate our two countries,” he said. “They’re tied together.”