U.S. President Donald Trump talks with auto industry leaders, including General Motors CEO Mary Barra (L) and United Auto Workers (UAW) President Dennis Williams (R) at the American Center for Mobility in Ypsilanti Township, Michigan, U.S., March 15, 2017.Jonathan Ernst/Reuters
U.S. President Donald Trump is on track to turn North America’s once dominant auto industry into a global backwater, a place where a couple of car companies churn out inferior, dirty vehicles for a captive consumer base that has no choice but to buy them.
And, unless Canada acts quickly and carefully to diversify our auto industry and untie ourselves from the U.S., we’ll be pulled down and mired in the same automotive mess as the Americans.
“Canadian consumers will not want to sit behind tariff walls driving [gas-powered] cars while the rest of the world benefits from the [electric vehicle] transition,” wrote the authors of a recent white paper by the Transition Accelerator, a prominent industrial policy think-tank. As it stands, however, that scenario is all too real.
The decisions by General Motors and Stellantis to cancel production of electrified vehicles at their Ontario plants in Ingersoll and Brampton respectively are, in large part, results of Trump’s dismantling of pro-EV policies, putting up tariffs walls and attacking Canadian workers. He’s succeeding in taking jobs from Canadians and slowing the inevitable EV transition.
The Transition Accelerator paper also says what every auto executive already knows: “Demand for electric vehicles in Canada and the United States has moderated over the past six months but the long-term trend is clear: EVs will be cheaper and more reliable than internal combustion engines.”
The rest of the world is driving forward on EVs as Trump is dragging America backward by putting up tariff barriers to shut out foreign competition, undoing fuel economy regulation as well as dismantling policies (namely former president Joe Biden’s Inflation Reduction Act) that would’ve accelerated America’s electric transition and helped the U.S. auto industry catch up and compete with China.
The incentives for U.S. automakers to invest in EVs have largely evaporated, while at the same time they are suffering massive consequences from tariffs.
“We’re kind of falling behind,” said Dimitry Anastakis, a prominent auto industry scholar and the LR Wilson and RJ Currie Chair in Canadian business history at the University of Toronto. “[EVs] are the future, and it’s going to be much costlier and take much more time to get to what the industry knows is the future,” he said. “The industry knows it has to get there and the problem for them is managing this transition is hard enough at the best of times, and then you’ve got a madman in the White House.”
In her third quarter letter to shareholders, GM head Mary Barra thanked the president for “tariff updates” and a new discount on U.S. heavy-duty pickups, while also acknowledging, “with the evolving regulatory framework and the end of federal consumer incentives, it is now clear that near-term EV adoption will be lower than planned.” As a result, the company took a US$1.6-billion charge in the quarter and Barra warned of more to come.
If the Big Three American automakers – Stellantis, Ford and GM – continue to fall behind international rivals on EVs, particularly those from China, the only way for Trump to protect them without massive public spending will be for America to put up bigger tariff walls and keep out foreign competition. It’ll turn North America’s tightly integrated auto industry into an island with its own unique ecosystem, cut off from advances being made elsewhere, making cars that are uncompetitive anywhere but here.
Anastakis said you can never count American automakers out completely. But, he said, “The Americans are getting their lunch eaten on the technology side of things and their presence in the world – they shrunk and shrunk and shrunk. North America is going to be a gas-guzzling backwater.”
It’s a problem for Canadian drivers, who could be denied more affordable cutting-edge EVs and frugal gas-powered vehicles because of our alignment with the U.S. But it’s an even bigger problem for Canada’s auto industry and especially the workers who depend on those jobs.
In the face of Trump’s brutal attack on Canadian auto workers and the environment, building out our own globally connected EV manufacturing sector – from mining critical minerals, refining them into battery components and assembling vehicles – has become existentially important.
Justin Trudeau’s Liberals and Doug Ford’s Conservatives have already made good progress in that direction (albeit at significant cost) by securing big investments and new jobs in the form of battery plants from Volkswagen and LG/Stellantis.
Prime Minister Mark Carney’s government is continuing that push, reaching out to China, Mexico, India and Europe for trade talks.
Canada’s auto industry has survived by tethering itself to the leading automakers globally, as Greig Mordue, an associate professor in the W Booth School of Engineering Practice and Technology at McMaster University, recently pointed out. In the 1960s, it was the Detroit brands. In the 1980s, it was the Japanese and today Toyota and Honda produce many more vehicles in Canada than their American counterparts. As Mordue suggests, Canada’s old strategy of balancing sticks (tariffs) and carrots (duty remissions for local manufacturing) to attract manufacturers could potentially be used again to attract Chinese automakers.
Bringing in Chinese brands to set up factories and suppliers in Canada without provoking Trump’s ire is a fine line to walk while he’s in the White House, but we can start to lay the groundwork.
Charting a distinct path for Canada’s auto sector, diverging from America, would need to involve additional measures too, perhaps allowing vehicles homologated for Europe to be sold in Canada. Another promising idea, proposed in a recent opinion piece published by the Toronto Star, suggests tweaking Canada’s EV Availability Standard to reward automakers that build parts and/or vehicles in Canada.
And, of course, by finally getting moving on mining the Ring of Fire for rare critical minerals, Canada can simultaneously reduce our reliance on American automakers while increasing their reliance on us.
None of this will be of any comfort to the thousands of families in Ingersoll and Brampton affected by GM and Stellantis job cuts. Those workers now face a grim reality. They deserved (and deserve) better.
Those job cuts are a warning – not to abandon the auto industry or the industrial policy that has built this sector into a powerhouse – but instead to diversify Canada’s auto industry and double down on its strengths for the sake of the next-generation of Canadian auto workers, for Canadian sovereignty, and for a clean and growing economy.