Donald Trump says he wants every car sold in the US to be made in the US and he’s willing to disrupt an entire industry to make that happen if we don’t make a deal with Canada we’re going to put a big tariff in cars could be a 50 or 100% because we don’t want their cars so that got us wondering just how intertwined are these two countries when it comes to making cars and can the US Auto industry survive without Canada let’s go through [Music] it the most straight for way we can try to answer this question is to first try.
and understand how much the US Auto industry leans on Canada today one way to do this is by simply following the production cycle of a single car part let’s take as an example the Pistons that go in a car’s engine how do you make a piston well you might use raw aluminum almost always sourced from Quebec because that’s where about 80% of North America’s aluminum comes from say that aluminum is then shipped to a factory in St Katherine’s Ontario where it’s melted down into the right shape.
then those Pistons are shipped to Detroit to be finished so they meet the exact standards of the vehicle they’re going into that’s already a fair bit of travel for just one small car part but the Pistons Journey doesn’t stop there because now they need to actually put these Pistons into an engine this happens in Windsor Ontario so back over the border and then another team in Michigan puts the engine in the car and then finishes assembly yet another trip across the border so the Piston went back and forth across the border three.
Can the U.S. auto industry survive without Canada?
or four or five or six times not as a piston first it started out as the material and then it was the first stage of processing the next stage of processing eventually it winds up in somebody’s car and that’s just the Journey of one part in one engine multiply that by almost every single part and you’ve got a car handled by hundreds of Canadian and American workers back and forth across the border now maybe this sounds complicated and it is the choreography of making a car and running literally hundreds of supplier.
partner um dance Partners is intricate they go on these milk runs and they pick them up at 12 different suppliers and they’re bringing Parts into distribution warehouses and close proximity and then they’re making these parts pallets and then they’re bringing them into the plant and they’re just showing up right at the moment that they need them so the next question becomes why exactly do car companies make this complicated process even more complicated by jumping back and forth over the border so many.
[Music] times according to everyone we spoke to the most relevant reason right now us automakers do things this way is because Canadian and American suppliers and manufacturers specialize in different things things and when you have free trade it’s actually cheaper and more efficient for a car company to go where the specialist is and the Border just doesn’t really matter like it’s just an arbitrary line and it takes less than 15 minutes to get from Windsor to Detroit where you’ll find lots of these plants.
Can the US auto industry survive without Canada?
there is very little duplication between Canada and the United States things that are done here are done here for a reason it’s faster cheaper more reliable higher quality at the end of the day these these companies have to make money and they decided that well getting this part in chat tam Ontario is cheaper than getting this part in Leonia Michigan and and they can do it they can deliver it they can get it done on time which all makes sense but let’s keep going with the why questions why did the industry decide to.
do it this way in the first place has Canada’s Auto expertise really always been so singular and without equal in a way that the US just can’t replicate we have these companies in Canada because that’s how the industry has evolved since the 1960s so there’s historical reasons for it a long long time ago GM and Ford did operate plants in Canada but those plants were only making cars for Canadians and sometimes the British Commonwealth this car was for their majesties King George and Queen Elizabeth their us plants made cars for.
American but then in the 1950s Canada ran into a problem automatic cars became a thing and almost everybody wanted one but the Canadian plants didn’t have the technology to make this new type of car so the fear became Canada would have to start importing most of its cars from the US and its Domestic Auto industry would collapse the Canadian government kind of freaks out and they say hey we’ve got this technological problem and it threatens to wipe out our whole industry so the Canadian government enacts a number of tariff measures that.
U.S. auto industry could be decimated by tariffs
are designed to encourage the production of cars in Canada yeah you caught that right that word that we’ve heard before the Tariff tariffs we’re going to tariff the hell out of them I am a tariff man yes that one except 70 years ago it’s Canada essentially kicking off a trade war with the US by putting tariffs on American cars and the thinking then should feel pretty familiar too it was all about making foreign cars more expensive to convince car makers and the US government to find a new way of.
running the industry a lot of people on both sides of the Border get very agitated about this but they also see it as an opportunity and the way that they figure it out and what they eventually come to is the 1965 Auto PCT that deal was essentially will allow us automakers to ship cars and parts back and forth between Canada and the US tariff free but there are conditions including that those automakers must invest more in their Canadian plants so they don’t disappear the idea was if you sell a car in Canada you have to build one in.
Canada to you know keep it keep things even and so the car company started to invest more and more in Canada and build more factories and have larger production runs by 1973 with the autoactivate full boom Canada builds 1.6 million vehicles and over a million of them go to the United States so look we’re kind of streamlining history here but this is effectively how this convoluted crossbar production chain got started and what you have now is a system that’s in pretty deep so when you ask GM or Ford why they can’t just build.
US doesn’t need Canadian energy or cars, says Trump
all their cars and all their parts in the US like Trump wants them to one of the reasons that General Motors and Ford respond and say we built cars in Canada is because we’ve been building cars in Canada since 1904 and 1918 and we want to be good corporate citizens we’ve also spent an awful lot of money investing in the plants here we’ve got a lot of employees here and there are of course other reasons too a lower Canadian dollar for example means things that are built in Canada are cheaper for those American companies if.
you want to sell something to Americans having a low exchange rate is a really good thing certain Commodities are cheaper in Canada because they’re made here if the US wanted to make aluminum okay they could but they would would have to build probably I’ve seen estimates six or eight nuclear power plants to replace the electricity that Quebec has all day every day but even all of this still avoids the original question which is okay there’s a system fine but could the American Auto industry survive without Canada if the.
US tried today to engineer it that way and the answer to that is yes but getting there would be painful once you start to un unravel those really complicated crossworder Supply chains you’re running the risk of actually grinding the industry to a [Music] halt first just consider how many new plants us automakers would have to build to replace their Canadian operations and how expensive that would be if you want to build 1.
Seven Charts Showing How Canada/Mexico Tariffs Would
4 million vehicles in in the US that are currently built in Canada that is five maybe six assembly plants assembly plants are three maybe $4 billion three maybe four years to build take these stellates assembly plants in Windsor and Brampton Ontario for example Less Than 3 years ago the company agreed to invest $3.
6 billion doll into these operations we are committed to Canada for the long run and for the next 100 years if they wanted to uproot that plant and move it to the United States they could do it but it would be really disruptive and it would be very costly and you’d have to staff these new American plants too right which we should note is exactly what the president wants to bring jobs back to America if you build here you have no tariffs whatsoever and I think that’s what’s going to happen I think our country is going to be flooded with jobs.
jobs for everybody but you’d have to find hundreds possibly thousands of people that can match what the Canadians are doing and the US is already struggling with not just a skills Gap but a gap in applicants for open positions in manufacturing they don’t have a large pool of skilled workers to do this work if they put a huge tariff On Tools dyes and molds from Canada there really is no alternative the US has never made a lot of inroads into that business because the the expertise resides here and that’s not easy to to.
Trump’s tariffs on Mexico and Canada challenge auto
to duplicate quickly so everyone we spoke to agre this could be done but it would take years if not decades to get the supply chain back on track and in the meantime the price of American cars in the US would likely shoot up at which point you also have to ask is Canada still buying those cars we buy about 1.
8 million Vehicles a year they might lose a market or their Market of 1.8 million Vehicles drops because maybe we put tariffs on us-made vehicles and maybe we take those tariffs off Chinese made vehicles and it needs that bottom line trade Wars are messy and to completely remove Canada from the equation Donald Trump would have to stomach a lot of chaos a very unhappy neighbor and many unhappy automakers but here’s the thing Trump may not need any of it to happen because the threat of it happening could be enough to force American
