GM CHAIR REPORT, August 9, 2018

Trade Wars, Tariffs and Future Business

On Friday July 27^th, 2018 we attended an important emergency meeting of the Unifor Auto Sector Leadership in London regarding the brewing storm of potential auto tariffs.

Background of our current Trade Dispute, Section 232 and how it potentially affects the Auto Industry

In April 2017, President Trump directed Commerce Secretary Wilbur Ross to investigate the impact of steel and aluminum imports on the national security of the United States, pursuant to the Section 232 of the Trade Expansion Act of 1962. Under this rarely used provision, should the Secretary of Commerce conclude that “[an] article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security”, the President has the discretion to unilaterally take any actions he deems necessary to “adjust the imports of such article so that such imports will not threaten to impair the national security”. Congressional approval is not required in such a situation.

On May 23, 2018, the U.S. Department of Commerce initiated another Section 232 investigation, this time into the impact of automobiles and auto parts imports on national security. Given the cross-border integration of the auto supply chain in North America, tariffs on automobiles and auto parts would cause substantial disruption to the North American auto industry. This appears to be a step towards further escalation by the United States in this “trade war”, all to exert additional pressure on Canada in the ongoing NAFTA renegotiation. Additional Section 232 investigations and tariff against other categories of products cannot be ruled out, which would inevitably result in additional retaliatory measures by Canada and other affected countries. This is raising concerns that he might follow through on threats to impose auto tariffs, a move that could devastate the car industry in Canada and lead to higher U.S. prices.

The car tariffs could apply to all countries, including NAFTA partners Mexico and Canada, the two biggest exporters of autos to the U.S.

Five automakers — GM, Ford, FCA, Toyota and Honda produced about 2.2 million vehicles in Canada last year. Approximately 85 per cent of those vehicles are exported, with the clear majority going to the U.S.

What Are The Consequences For Our Workplaces?

Auto analysists state “If the U.S. imposes a 25 per cent tariff on those exports, suddenly it doesn’t make much economic sense for companies to invest in Canada. It’s not an economically feasible prospect to import vehicles to the U.S. market in a 25 per cent tariff situation. It would be very difficult to sustain a Canadian industry without relatively free access to the U.S. market.”

The tariffs threaten an ever-shrinking sector in Canada that has lost 53,000 jobs between 2001 and 2014.
Canada’s loss has been Mexico’s gain, as production there has soared thanks to NAFTA and other trade deals.
In 2008, Mexico surpassed Canada for the first time to become the second-largest North American producer of light vehicles, according to the Center for Automotive Research. While total Canadian production may decline by up to135,000 units between 2018 and 2020, Mexico’s are forecast to rise by 850,000. The threat of tariffs adds to the uncertainty in the industry, which faces a potential trade overhaul because of NAFTA negotiations.
Auto analysts also state that the tariffs would also be bad for the U.S. American consumers who would have to pay US$5,000 to US$7,000 more for their vehicles on average, potentially reducing U.S. auto sales by 4 million to 5 million units a year. “This is the nightmare scenario.”
Ontario would be hit the hardest as most of the industry is centrally located in Ontario.
“To date the automakers are sitting on their hands waiting to see how this all unfolds. All future investment could be jeopardized until this is resolved for all automakers in Canada including commitments they have already made.”

Crafting Our Collective Response

UNIFOR is working with the Government at all levels for support and common messaging to educate Trump’s team on trade with Canada as well as support for the industry if a trade war does escalate into the auto sector.
Member engagement will be critical in our efforts to sustain our industry in Canada. There will be potential demonstrations to highlight the impact to our members, our communities and our Province. We need to work together to weather this storm and get back to business.
Cross border solidarity is important. We need the support of our UAW brothers and sisters. They are very aware Canada is not the problem with auto manufacturing.
Calling on the Liberal government to take immediate action in protecting Canada’s auto sector from “unnecessary hardship and job losses.”
A decision is not expected until sometime in 2019

We will continue to monitor this situation closely and additional information will be provided as it becomes available, especially information specific to St Catharines.