Report estimates tariffs will cost Ontario $2.9B in auto investments
A Canadian business trade group estimates Ontario could miss out on $2.9 billion in automotive investment over the next year as a result of the trade war between the United States and Canada.
Almost half — 49% — of Ontario auto-sector businesses have paused or canceled investments because of the trade tensions, according to the report from the Canadian Federation of Independent Business, which received 500 responses from business owners between May 22 and June 10. The findings reveal tangible effects of trade policy on the auto sector, which in Canada is centralized in the province in Ontario with which Michigan has the largest trade border crossing with Canada.
““They’ve paused hiring, salary rises and purchasing machinery and equipment investment,” Joseph Falzata, the report’s co-author and CFIB’s policy analyst for Ontario, said in a statement. “It trails down to uncertainty. You can’t expect a business owner to make a long-term decisions — they need certainty.”
U.S. President Donald Trump first imposed 25% tariffs on Canada and Mexico in March, though he soon granted exceptions for vehicles and parts compliant with the United States-Mexico-Canada agreement. He later imposed import taxes of 25% on all vehicles and certain parts imported to the United States, though USMCA-compliant parts remain exempt. There also are 50% tariffs on imported aluminum and steel. Canada has responded by imposing 25% tariffs on vehicles not compliant with the USMCA imported from the United States. That rule didn’t put a duty on parts.
Nearly two in three businesses in the Ontario auto sector have been affected by U.S. tariffs, contributing to a 13% decline in sales. Still, more than three in five of the businesses say they feel confident in their ability to manage further disruptions over the next year.
Of the survey responses, 35% have shifted to focus on the domestic market and suppliers, 29% are looking to international markets and suppliers outside of the United States, 27% have diversified their suppliers, 25% have rescheduled or paused orders from suppliers, and 25% have delayed or rescheduled shipments to customers.
Damage from tariffs may already have been done long-term, Falzata said.
“If Canadian companies are looking elsewhere, that can cause problems down the road for American companies and Canadian companies as well,” he said. “Windsor and Detroit are sister cities that are so deeply intertwined. It’s not just Stellantis, Ford and GM who need help as economic drivers in the city. They bring and forge all these small businesses that pop up around them.”
And those businesses support other small businesses in their communities, from restaurants and hotels to dry cleaners and grocery stores, Falzata added.
Less than 2% of small auto business owners said they expect to take advantage of Ontario government programs designed to help them overcome challenges created by the tariffs. Many are ineligible, lack compliance departments to prove eligibility or don’t know about the programs, according to the report, which recommends broadening the requirements, using revenues from tariffs to reduce taxes on affected companies, and supporting efforts to expand into new markets.
“We need to make sure,” Falzata said, “small businesses are protected on both side of the border.”
@BreanaCNoble
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