Workers at the FCA Windsor Assembly Plant in Windsor, Ontario on Oct. 5, 2018.REBECCA COOK/Reuters
U.S. President Donald Trump’s 25-per-cent tariffs will quickly force North American auto plants to stop production, warns Linda Hasenfratz, executive chair of Linamar Corp., an Ontario-based supplier to the major automakers.
Mr. Trump said he would impose the tariffs on Feb. 1 to correct trade imbalances and spur Canada and Mexico to improve their border security, despite warnings from economists the levies will drive U.S. inflation and damage the economy.
The U.S. has a merchandise trade deficit with Canada of about $100-billion, but excluding Canada’s exports of oil the U.S. has a large trade surplus with Canada. The trade in cars and autos parts between Canada and the United States is about balanced, TD Bank economist Andrew Foran said in a recent research paper.
Ms. Hasenfratz said the costs of the tariffs will be borne by her customers — car makers — who require highly specialized components. It can take 12 to 18 months to source and engineer alternative parts, she said in an interview.
“It would just create an exorbitant amount of cost, and our customers can’t afford to absorb that,” Ms. Hasenfratz said in an interview Saturday. “Consumers certainly aren’t going pay it, so demand will disintegrate. So in my opinion, it wouldn’t be more than a week before we would see vehicle production in North America grind to a halt, and that means millions of people laid off, the majority of which would be in the U.S., and I can’t see how that’s a good thing for America.”
Ontario’s three largest publicly traded auto parts suppliers, Linamar, Magna International Inc. and Martinrea International Inc. have extensive manufacturing facilities across North America and overseas. They have followed the world’s automakers to Mexico, benefiting from lower labour and production costs as well as tariff-free access to the United States and Canada. It’s a business model that Mr. Trump’s tariffs will upend.
Linamar, a Guelph,Ont.-based maker of transmissions, engine components and other products, employs 26,500. It has five auto parts factories in Mexico, and another that makes industrial equipment. The company has another 17 factories in the United States, including one that makes agricultural machinery, about 30 Canadian facilities, and several in Europe and Asia.
Ms. Hasenfratz said she views the tariffs as a fleeting menace that can be levied — or dropped — on the whim of a government. They will not lead to the closure of Linamar’s Canadian factories. “Absolutely not,” she said. “We manufacture in Canada because it is our deepest bench of talent. Our Canadian plants are our most productive globally.”
Magna, a maker of many different car components as well as complete vehicles, has 33 factories in Mexico, 58 in the U.S. and 50 in Canada, plus several engineering and sales offices.
Martinrea has more than a dozen Mexican factories, in addition to facilities around the world.
For decades, Canada and the U.S. have had free trade in autos, and Mexico joined the pact in the 1990s. The agreements allowed the auto industry to become fully integrated — parts often cross borders five or six times before a vehicle is assembled.
Vehicles are Canada’s second-most valuable export, worth $51-billion in 2023. About 93 per cent of this is sent to the U.S., the Canadian Vehicle Manufacturers’ Association says. Canadian plants made 1.5 million passenger vehicles in 2023, and employed 128,000 people making autos and parts.
