BUSINESS
05/24/2018 15:58 EDT | Updated 05/24/2018 16:04 EDT

Trump's Idea For 25% Tariffs On Auto Imports Met With Shock, Disbelief

Auto tariffs could be devastating for Canada, but the chances are slim they will happen, experts say.

U.S. President Donald Trump gestures as he speaks in the Roosevelt Room at the White House in Washington, D.C., May 24, 2018. Canadian auto industry observers are reacting with shock and disbelief to news that Trump has ordered an investigation that could result in tariffs of up to 25 per cent on auto sector imports into the United States.
Kevin Lamarque / Reuters
U.S. President Donald Trump gestures as he speaks in the Roosevelt Room at the White House in Washington, D.C., May 24, 2018. Canadian auto industry observers are reacting with shock and disbelief to news that Trump has ordered an investigation that could result in tariffs of up to 25 per cent on auto sector imports into the United States.

Canadian auto industry observers are reacting with shock and disbelief to news that U.S. President Donald Trump has ordered an investigation that could result in tariffs of up to 25 per cent on auto sector imports into the United States.

David Adams, president of the Global Automakers of Canada, which represents Japanese car manufacturers Honda and Toyota, says the news is "perplexing'' because tariffs would make cars more expensive in the United States, hurting the U.S. consumers Trump wants to protect.

He says the harm in Canada caused by tariffs would vary depending on how severe and wide-ranging they are.

According to the Canadian Vehicle Manufacturers Association, the Canadian auto sector supports about 500,000 direct and indirect jobs. About 95 per cent of Canadian-made vehicles are exported to the United States.

Trump's move is seen as an effort to gain a bargaining chip in stalled talks with Canada and Mexico over the North American Free Trade Agreement.

But the move was condemned by the U.S.'s trading partners on Thursday, including China, Japan and the European Union.

Mexico is the top exporter of passenger vehicles and light trucks to the U.S followed by Japan, Canada, Germany and South Korea, according to the Department of Commerce.

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Japan's minister of Economy, Trade and Industry, Hiroshige Seko, said Japan, which accounts for about 40 per cent of U.S. vehicle imports, will continue to remind U.S. officials that any trade measures must conform to the rules of the World Trade Organization.

If such a measure is taken, "it would be an extremely far-reaching trade sanction that would put the global market into turmoil,'' Seko said. "We are extremely concerned.''

Associate professor Sui Sui of Ted Rogers School of Management at Ryerson University says the tariffs could be devastating on Canada, but she doubts the U.S. will go through with them because the North American industry is so intertwined it would hurt the U.S. just as much.

The White House said in a statement Wednesday that Trump had asked Commerce Secretary Wilbur Ross to consider whether the imports of automobiles, including trucks, and automotive parts threaten U.S. national security.

The president said in the statement that "core industries such as automobiles and automotive parts are critical to our strength as a nation.''

Talks aimed at rewriting the North American Free Trade Agreement have stalled between the U.S. and Canada and Mexico, with the discussions at an impasse over rules for car production.

U.S. Treasury Secretary Steven Mnuchin has said that efforts to renegotiate the trade agreement could spill into next year.

The Canadian Press with a file from The Associated Press

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