American Commerce Secretary says auto production can move Stateside in 6 months—that’s not how supply chains work
- Trump’s long-threatened 25% tariffs on a raft of Canadian products, including cars, are now in effect
- Automakers are already warning the policy will increase vehicle costs and inflation
- Rumours are Honda will make the next Civic Hybrid in Indiana rather than Mexico, but not until 2028
After initially putting a pause on tariffs aimed at Canada and Mexico, U.S. President Donald Trump on March 4 placed a 25% tariff on most products from the two countries, as well as a lower 10% tariff on energy products. When asked if the countries could do anything to reverse the decision, Trump replied there was “no room left for Mexico or Canada.”
“Tariffs are taxes that hurt consumers with increased costs, drive inflation, and unfairly impact workers on both sides of the border,” said David Adams, president of the Global Automakers of Canada, which represents auto companies that sell or make vehicles in Canada. “We need a long-term solution that removes these unjustified tariffs and ensures stability and competitiveness for all North American businesses.”
Dennis Darby, head of the Canadian Manufacturers and Exporters, said the tariffs undermine the USMCA free-trade agreement and threaten the future “of the most successful economic relationship in the world.” The USMCA – it stands for United States-Mexico-Canada Agreement, although Canada generally calls it CUSMA, with “Canada” first – replaced NAFTA, the North American Free Trade Agreement, on July 1, 2020. Although Trump earlier this year said “Who would ever sign a thing like this?” in regards to free-trade deals, the reality is that the USMCA was implemented at his request during his first term, and he was the one who signed it.
And this is the car’s next version—according to the source, it was slated to go to Mexico in November 2027, but will now start up production in Indiana in May 2028; and if the Indiana plant can’t meet demand, Honda will import “from nations not hit by tariffs.” Officially, Honda said it would not comment, and that also means no news on how the automaker’s plants in Alliston, Ontario might be affected. Reuters said about 40% of all the vehicles Honda sells in the U.S. are made in Mexico and Canada; and about 80% of Mexico’s total output is destined for the U.S.
Trump initially claimed the tariffs were proposed to pressure America’s neighbours to halt fentanyl coming across the border from Canada and Mexico, as well as to change their immigration policies, and insisted that Canada appoint a “drug czar” to address the problem, which it did. Earlier today, Howard Lutnick, the U.S. Commerce Secretary, said the tariffs on Canada are part of the “drug war,” and that Canada hadn’t done enough to stop fentanyl coming into the U.S.
Lutnick also mentioned auto plants in Canada and Mexico, and said automakers could move production back to the U.S. “in six months.” That’s a tall order, given the complexity of the supply chain – it’s estimated an auto part can be involved in some eight border crossings before it’s finished – and retaliatory tariffs by Canada on raw materials such as aluminum should also take a toll.
Some experts are estimating tariffs could add as much as $12,000 to the cost of a vehicle. Contrary to what Trump has repeatedly and incorrectly said about tariffs, they’re paid by the importer, not by the country exporting the products.
In a speech earlier today, Prime Minister Justin Trudeau said the U.S. “launched a trade war against Canada, their closest partner and ally, their closest friend. At the same time, they’re talking about working positively with Russia, appeasing Putin, a lying, murderous dictator. Make that make sense.”
When the U.S. tariffs came into effect just after midnight this morning, Canada retaliated with an initial $30 billion of tariffs on U.S. goods, and promised to add another $125 billion within three weeks.
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