If there is a sector in the Canadian economy that has faced the particular objective of the American president Donald TrumpPrice threats are Canada’s automotive industry.
Trump said he wanted to “make Detroit cars”, indicating that he wanted to replace the Canada industry with an entirely national American automotive industry.
But experts say that it could end up cost the United States tens of billions of dollars and at the end, the pressure may not be worth the juice.
In a Interview with Fox News Earlier this month,, Trump said Canada had “stolen” the automotive industry in the United States.
“If you look at Canada, Canada has a very large automotive industry. They stole it from us. They stole it because our people were sleeping behind the wheel, “said Trump.
He added: “If we do not conclude an agreement with Canada, we will put a big price on the cars. It could be a 50 or 100% because we don’t want their car. We want to make cars in Detroit. »»
But can it be done?
A card representing car manufacturing facilities in Canada.
“It is not possible,” said Brian Kingston, President and CEO of Canada Vehicle Manufacturers Association. “It is not realistic about the entire North American automotive industry in the United States.”
He added: “We have had policies that have been deliberately designed for over 60 years to create an integrated North American industry.”
How does the automotive sector work?
The automotive manufacturing sector and its supply chain in Canada and the United States have been deeply integrated since the 1960s.
In 1965, former Prime Minister Lester B. Pearson and former American president Lyndon B. Johnson signed the Canadian Automobile Products agreement in the United States, commonly known as Auto Pacte.
The manufacturing industry of Canada automobile parts, in number.
The agreement deleted prices on cars and automotive parts between the two countries.
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This was in force until 1994, when the North American Free Trade Agreement (ALENA) entered into force, extending free trade to all sectors, not just the manufacture of cars.
In 2018, Alena was replaced by the Canada-United (CUSMA), which is in place for the rections in 2026.
This means decades and billions of dollars in facilities, infrastructure and contracts that have been developed between car manufacturers and parts suppliers.
If Trump imposes prices, it would mean that car manufacturers should break some of their contracts and abandon the infrastructure to move to the United States
Flavio Volpe, president of the Automotive Parts Manufacturers Association, said: “When you break a supplier contract, you need the money. We believe that closing costs represent more than $ 500 million on a factory (car manufacturing). »»
Canada has 14 car manufacturing facilities, all in Ontario.
American companies General Motors and Ford Motor Company each have three factories in Canada, while three belong to Stellantis, which partly belongs to the United States.
According to the estimate of volpe, the costs of closing on nine factories alone are approximately $ 4.5 billion.
To build them from scratch in the United States, which has higher exchange rates and labor costs than Canada, would cost billions more.
In 2023, Volkswagen announced that they were investing $ 2 billion in the construction of a new factory in South Carolina. Volpe said that 2 billion US dollars are a fairly good estimate of the number of each factory would cost to build. For nine factories, it would cost $ 18 billion. For the 14 factories, it would cost $ 28 billion.
This estimate does not include the 26 car manufacturing factories in Mexico or the car manufacturing industry in Canada.
“There are 1,400 parts and tools installations in Canada. In the United States, 156 Canadian parts and tool manufacturing facilities are devoted to the United States in 18 US states that employ 50,000 Americans, “said Volpe.
Kingston said: “Canada and Mexico were responsible for around 22% of vehicles consumed in the United States last year.”
He added that the cost to replace the two manufacturing bases would be “phenomenal”.
“50 billion US dollars for on the ground, all of the industry is a very conservative estimate. If you look at the amount of investments announced by car manufacturers and suppliers in North America since 2020, it exceeds $ 288 billion, “he said.
It would also take a long time, he said.
“It would take years, between three and a decade, to build assembly factories on this scale. And it would cost billions of dollars, “he said.
Volpe said that some of the major American automotive companies may not survive this transitional decade.
“This is an impossible hypothetical because the companies you will get it will become bankrupt,” he said.
Dimitry Anastakis, professor at the Rotman School of Management at the University of Toronto, said: “You are literally talking about the deractive factories that have been in place for decades where companies have spent billions of dollars.”
In recent years, car manufacturers have invested billions in their Canadian facilities to equal the domination of China in the electric vehicle sector.
Move these factories would mean that their investments should be struck off.
“Stellantis has this plant in Windsor, where they build the Dodge Charge. They just spent $ 1.5 billion in the line of this line so that it could build both the internal combustion engine Dodge Chargers and EV Dodge Chargers, “he said.
“If you are going to try to bring this home, you would essentially uproot investments of $ 2 billion.”
Kingston said the benefits of maintaining Canada and Mexico in the North American supply chain exceed the value of the dollar.
“What makes us so attractive is that we have a highly qualified and highly qualified workforce. We have history of automotive manufacturing and people very close to industry and have skills they can provide to industry, “he said.
In 2024, Chinese car manufacturer BYD dethroned Tesla by Elon Musk as a number one EV manufacturer in the world. Kingston said the United States needed Canada to have a chance to beat China in the EV breed.
“China controls approximately 80% of the inputs that fall into advanced batteries. The only other source you have in the Western hemisphere is Canada. Canada has all of the minerals necessary to build new generation electric vehicle batteries, “he said.
Anastakis said the North American consumer will have the consequences of Trump’s trade war.
“We, in North America, are going to face a future where, if the prices pass and this uncertainty continues, the cars will be much more expensive. We will have less choice on cars. We are going to drive fossil fuel cars when the rest of the world accelerates their transition to electric vehicles, “he said.