The incoming administration of US president-elect Donald Trump is signaling Canada could face the same retaliatory trade measures as Mexico, in what would be an even bigger disruption to automakers such as Toyota Motor Corp and Fiat Chrysler Automobiles NV.
Asked whether an auto border tax could impact Canada, Trump spokesman Sean Spicer told reporters that their policy is not specific to any one country.
“When a company that’s in the US moves to a place, whether it’s Canada or Mexico, or any other country seeking to put US workers at a disadvantage,” Spicer said during a conference call on Friday, then Trump “is going to do everything he can to deter that.”
Any move to thwart imports from Canada would be a more severe impediment to the North American auto sector than sanctions against Mexico, since the industry’s links with the US’ northern neighbor run deeper.
Assembly in Canada, which along with the US is a higher-cost producer than Mexico, is also focused on the more profitable and faster growing light-truck and sports vehicle segment of the market.
In the first 10 months of last year, the US imported US$37 billion worth of passenger cars from Canada, a 12 percent year-on-year increase, according to Bloomberg Intelligence.
That compares with US$19 billion in imports from Mexico, which have been on the decline.
Michigan-based automakers such as Ford Motor Co often ship parts back and forth across the border to factories in Ontario, and made commitments to invest in Canada earlier this year, while finishing union contract negotiations.
The auto industry is global in nature and all vehicles contain a percentage of non-domestic content, Toyota spokesman Aaron Fowles said in an e-mailed statement.
This type of tax would have an impact on every part and product that is imported to the US, which means that prices for all vehicle makes would increase, the statement said.
The US rang up a US$9.1 billion merchandise trade deficit with Canada through November of last year, lagging the Mexican shortfall of US$58.8 billion. Mexico has also moved ahead of Canada as a supplier of products to the US in recent years on the strength of growing investments in auto factories there.
Earlier this week, Montreal-based National Bank Financial estimated a 10 percent tax on goods crossing the US border would knock 9 percent off the value of Canada’s exports there.
“We need to represent Canada, represent Canadians, represent our interests in all of our discussions around the world and that is exactly what we’ll look to do with the incoming administration,” Canadian Minister of Finance Bill Morneau told reporters before Spicer spoke, when asked about the threat of a border tax.
Mexico must be ready to respond immediately with its own tax measures if Trump’s administration imposes a border tax, Mexican Minister of the Economy Ildefonso Guajardo on Friday said.
“It is clear we need to be prepared to immediately neutralize the impact of such a measure,” Guajardo said in an interview on Mexican TV. “And it is very clear how — take a fiscal action that clearly neutralizes it.”
Guajardo said Trump’s proposed tax “was a problem for the entire world” and that it “would have a wave of impacts that could take us into a global recession.”
However, the minister said he expected foreign direct investment in Mexico this year to total about US$25 billion, with investment in the energy and telecom sectors expected to more than make up for the loss of a planned US$1.6 billion Ford factory that the company said this month it is canceling.
Trump had strongly criticized the plan, but Ford said its decision was not the result of pressure from Trump.
Guajardo said that he expects total foreign direct investment during the six-year term of Mexican President Enrique Pena Nieto, which ends in late 2018, to average US$30 billion annually.
Additional reporting by Reuters
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