‘Quite a nightmare’ — Windsor, auto sector brace for more U.S. tariffs

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For decades, a comprehensive automotive industry has classified U.S. and Canadian parts into one category, but this is amid changes in the second wave of attacks caused by U.S. President Donald Trump toward auto free trade.

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The U.S. government is working to build a system by May 3 that will allow it to impose a 25% tariff on non-U.S. parts that crisscross three Kusma (Canada, the United States, Mexico) trading partners.

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Until then, all Cusma-compliant parts will not be subject to tariffs.

“Even for the U.S. government, this will be challenging,” said Sam Fiorani, vice president of global vehicle forecasting.

“They have been doing this for nearly 40 years.”

The Canadian government responded Thursday to the launch of automatic tariffs, which signed a 25% tariff on U.S. imported vehicles that do not comply with Kusma. Tariffs also don’t apply to auto parts as the federal government tries to avoid more pain on Canadian parts manufacturers that could leave them unemployed.

“Suppliers usually have plants on both sides of the border and they may have multiple sources themselves,” Fiolani said. “This makes it even more difficult.”

Creating a way to track everything from the tiniest screws to more complex finished products, such as engines, could create a whole new layer of bureaucracy, Fiolani said.

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The costs associated with charging tariffs are sure to erode the over-inflattening of Trump’s new income from owning the party.

“The president thinks it will make money,” Fiolani said.

“Find a way to do this, using the many customs agents you need, as many accountants as possible, it will be very difficult.

“This is the idea behind it. The idea is that all the parts and the vehicles will be made on the American side of the border.”

These parts and vehicles will be more expensive

The cost of the program will also occur outside the tariffs on the price of parts inflation.

“All of these parts and vehicles will be more expensive because the automotive industry is designed to be efficient between the USMCA countries to get everything right,” Fiolani said. “This is not designed for a sudden change in the program.”

Designing and tariff systems will be an easier task for the job, said Peter Frize, a professor of mechanical and automotive engineering at the University of Windsor.

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Like the section itself, the materials and process of creating each section also involve all three Cusma partners.

“The question is, it can get very complicated – what is the Canadian part, what is American?” Fritz said.

“Suppose you have an arm with a lower control made of aluminum. The aluminum is almost certainly from Quebec. It may have gone to the United States and been capped. It might have gone to Canada, pressed the ball joint into Quebec, and then returned to the United States and assembled it into a car.

“They know what the part number is and the part number they buy from it, but they may or may not have a full history of where the material comes from, where the process and the value gained at each stage of those processes.

“I don’t know if the car company can do this quickly.”

Frize added a car, with 20,000 to 30,000 parts providing a lot of paperwork and new costs for the industry and government.

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“It will be a nightmare to achieve this goal,” Fritz said.

“It will be an expensive effort. American consumers will pay between $3,000 and $20,000 for a car.”

Fritz added that parts companies and their suppliers do not have profit margins to take advantage of the additional costs of tariffs and related expenses.

“They have thin edges and pushing them into the red doesn’t take much. If they can’t make money, they won’t do it.”

“Someone has to pay for it. Taxpayers will also pay for the required border services.”

Fiolani said that due to the size of the automotive industry, it accounts for half of the US $2.4 trillion worth of US manufacturing in 2024, the chain reaction of tariffs will be far away.

“The American public doesn’t fully grasp how deep this will become like the rest of us,” he said. “It costs more than what the public realizes, and probably more than what the government explains to the public.

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“Anyway, this year will be a difficult year, which increases the expense of doing business in the U.S., which brings us closer to this year’s recession and, unfortunately, has dragged on other countries with us.”

The reality of North American auto industry is that Trump’s tariffs are having an immediate negative impact.

Stellantis started on Monday with nearly 4,000 Windsor rally plant workers laying off two weeks of work, with 900 workers at U.S. factories in Indiana and Michigan providing plants in Windsor and Mexico.

Cleveland-Cliffs, the largest steel supplier in the U.S. auto industry, laid off 600 workers from its Dearborn, Michigan plant last week. It also fired another 630 employees from two iron ore mines in Minnesota, blamed on insufficient demand in the automotive industry.

More costs for anyone who buys a vehicle – new or used

“Every car’s profit margin will be lower, and it will cost more whether you buy a new car or have used it,” Fiorani told the parts tariff.

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“This will reduce the demand for new vehicles and increase the demand for used cars, thus increasing the price of both. As demand for these vehicles in the United States decreases, it will lower their plants, thus making them lower.”

Fiorani added that tariffs will also reduce product choices with automakers, thereby providing favor for more expensive vehicles with larger margins. Germany’s Mercedes Benz said this week that it may have to lower its cheaper models from the U.S. market due to tariffs.

“It will actually eliminate $30,000 vehicles in the U.S.,” Fiolani said. “It pushes up the premium for everyone.

“If people can’t afford cars now, they will certainly not be able to afford six months when the same car will cost more bundling.”

dwaddell@postmedia.com

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