U.S. President Donald Trump is sparing some Canadian-made auto parts from his punishing 25-per-cent tariffs, which are set to go into effect May 3.
U.S. Customs and Border Protection on May 1 released new guidance that says automobile parts compliant with the United States-Mexico-Canada Agreement on trade will not face the levies.
Read more: Live updates on tariff news and impacts
Interactive map: Auto manufacturing sites in Canada, the U.S. and Mexico
“It looks like the White House agrees that tariffs on Canadian and Mexican parts would shut down American auto [production],” Canadian Automotive Parts Manufacturers’ Association President Flavio Volpe said in a post on LinkedIn. “[It’s] good news today on something we’ve been working on relentlessly, all day, everyday for months.
“Immediate crisis averted, onto the next one.”
Unifor President Lana Payne didn’t greet the news as enthusiastically.
The guidance issued May 1 by U.S. Customs and Border Patrol changes nothing for the Canadian auto industry,” she said. “It’s a policy designed to keep U.S. factories running, because they rely heavily on Canadian-made auto parts, while continuing to throttle Canada’s auto assembly plants.
“[USMCA]-compliant parts built in Canada that find their way into Canadian-made cars, will still face a tariff. The non-U.S. content of every Canadian-assembled car shipped south of the border has been, and will continue to be, tariffed at 25 per cent,” Payne said.
“This is both an unjustified and unwarranted attack on the Canadian auto industry, and Canadian autoworkers. The only fair end to this trade war is zero tariffs on Canadian cars and parts. Period.”
First half of a solution
Volpe agrees with Payne on that point.
“This is the first half of a solution,” he said. “If we don’t get the second half, the removal of tariffs on Canadian assembled vehicles, the industry here will remain subject to a slow bleed, meant to hurt automakers’ business in Canada and Mexico.”
Linamar Corp., Canada’s second-largest supplier, applauded the changes.
“Recent updates regarding tariffs in the auto industry are welcome relief to the millions of North American workers in this vital industry to North American economic health,” the company said in a statement to Automotive News Canada. “Maintaining tariff free status for USMCA compliant parts means our industry can continue making vehicles without prohibitive cost burdens in the highly integrated North American supply chain.”
The guidance says the exemption does not apply to automobile knock-down kits or parts compilations.
Trump signed an executive order earlier this week he says will give some temporary relief to an automotive industry besieged by multiple tariffs.
The order provides a rebate to automakers that finish their vehicles in the U.S., and halted some additional tariffs, like steel and aluminum, from stacking on the auto duties.
Linamar also said those rebates will help the North American auto industry.
“Although tariffs will be introduced for offshore suppliers of auto parts, rebates will allow automakers needed time to evaluate alternate North American supply for such,” the supplier said. “This will be a huge opportunity for automotive suppliers in North America, including, of course, Linamar.”
Trump slapped a 25-per-cent tariff on vehicle imports to the U.S. earlier in April, but granted a carveout for the American-made parts of cars compliant with the continental trade pact.
Canada’s largest supplier, Magna International, declined to comment.
— The Canadian Press contributed to this report.
