Trump’s tariff threat is raising anxiety at the heart of Canada’s auto industry

Since 1988, Lanex Manufacturing’s huge presses on the edge of Windsor, Ontario, have been stamping door tracks, folding seat latches, tailpipe hooks, frame tie rods and other mundane pieces of metal. that make their way in vehicles from Corvette to Corvette. Honda minivan.

But, these days, concerns about the future permeate the plant as President-elect Donald J. Trump prepares to enter the White House. He promised to impose a 25 percent tariff on all goods exported from Canada to the United States. In Windsor, that would be his life: cars and everything that goes into them.

“Everybody’s waiting for the next shoe to drop,” Bruce Lane, Lanex’s president, said in his boardroom, the walls of which were made of painted concrete blocks. “If Windsor loses its auto business, Windsor will not survive.”

Few Canadian cities are as aware as Windsor of the integration of the economies of the two countries. The city is just across the Detroit River from Detroit, and Canada’s maple leaf flag often flies alongside the stars and stripes here. And no industry has been woven across the border for as long as car manufacturing.

“These workers here in Windsor are more exposed to trade with the United States than anyone else,” Prime Minister Justin Trudeau said at a steel mill during a recent visit to the city.

Mr. Trump, he added, “is proposing tariffs that hurt not only people here in Windsor, but people across the country and even in the United States.”

Windsor’s two major landmarks are shared with Detroit: the $5.7 billion Gordie Howe International Bridge, due to open this year, and the 96-year-old Ambassador Bridge, which carries about $300 million in the daily cross-border trade. Of Canada’s $440 billion in annual exports to the United States, only oil and gas generate a larger amount of cars, trucks and auto parts.

But with Canadian officials taking Mr. Trump at his word that he will follow through on his threat of tariffs, Mr. Lane and others in the auto industry are already bracing for the potential fallout.

George Papp is the managing director of Papp Plastics, whose headquarters are located next to the impressive new suspension bridge. He said that his US customers, mainly motorists, only invoke the terms of the contracts he was with them and deduct the cost of the fees from the amount they pay.

“Who’s going to take the hit?” Mr. Papp said. “Me, and people like me and companies like mine.”

Flavio Volpe, the president of the Automotive Parts Manufacturer’s Association, a Canadian trade group, estimated that most of its members had a single-digit profit margin and that the tariffs that Mr. Trump has promised they will be ruinous.

The intertwining of the auto industry in the two countries was cemented in 1965 when Canada and the United States reached an agreement that effectively eliminated the border for the industry. Today, 90 percent of cars and trucks made in Canada are shipped to the United States, mostly by rail.

At Lanex, small metal parts that few motorists will ever see are forged into shape by more than 600 tons of pressure from the company’s presses. Their journeys illustrate how far the two countries’ automotive industries have come.

As a small supplier, Mr. Lane does not deal directly with carmakers, but sells his goods through larger parts manufacturers. The seat latches that Lanex makes for Honda minivans are sent to a plant elsewhere in Ontario, where they are fitted with other parts and then shipped to an assembly line in Alabama owned by Honda, a Japanese company. Mr. Lane’s factory sent parts to Michigan for heat treatment, took them to Windsor for more machining and then sold them to a company in the United States.

“Windsor is used to going back and forth on the border,” Mr. Lane said. “It’s like getting out of bed in the morning.”

The upheaval over possible tariffs comes at an already difficult time for Canada’s auto business. Many auto parts manufacturers have yet to see their business return to pre-coronavirus pandemic levels due to lagging car sales. In 2020, Lanex had about 60 employees working two shifts, but now has about two dozen employees working a single shift.

The anxiety is particularly acute in Windsor, which had a metropolitan population of about 484,000. Besides the freight trucks rumbling across the Ambassador Bridge, the city’s most obvious automotive symbol is a gigantic Stellantis factory which produces the Chrysler Pacifica minivan as well as the Dodge Charger muscle cars.

A city within the city, it employs 4,500 workers, and the company said it planned to add thousands more.

Europe-based Stellantis, aided by billions of dollars in Canadian subsidies, is building a battery plant in a joint venture with South Korean company LG in Windsor and recently spent 1.89 billion Canadian dollars (about $1.3 billion ) to renew its assembly plant making electric vehicles alongside those powered by gasoline.

But like many carmakers, Stellantis is now in a slump as it struggles with the transition to electric vehicles and with competition from China.

James Stewart, the president of the local union representing Windsor’s Stellantis workers, said he didn’t believe a higher rate would necessarily deal a fatal blow to Stellantis’ operations in Windsor, given how much the company had invested.

But with much of Windsor’s economic well-being closely tied to trade with the United States, Mr. Stewart said, the tariffs would take a heavy toll, including business closures, layoffs and production cuts.

“We’re a suburb of Detroit; we’ve always felt that way,” he said, adding that Windsor seemed to be “under attack and for no reason.”

Across Windsor, there is confusion about exactly what Mr. Trump is looking for. He initially characterized the tariffs as a way to induce Canada and Mexico to better secure their borders to stem the flow of undocumented migrants.

But he also pondered making Canada the 51st state, noting that the United States was heavily invested in Canada’s military defense, and threatened to use the attached economic force. He also blasted what he describes as Canada’s “subsidy” from the United States, an apparent reference to the United States’ trade deficit with Canada, largely due to oil and gas imports.

The Trudeau government is expected to detail how would it turn out against any US tariffs on Monday, the day Mr. Trump will take office.

But Canada’s comparatively small economy makes it difficult for the country to inflict substantial economic damage on the United States, although levies against specific products could hurt individual states. Restocking fees will also increase prices in Canada.

Back at the Lanex plant, Mr. Lane said that, by sheer coincidence, the company had embarked on a “secret” non-automotive manufacturing project that had unexpectedly become a potential hedge against the fees. He declined to offer any details to avoid alerting competitors.

As part of this, three machinists in a corner of the plant were busy inserting the parts into a piece of tool.

Regarding his auto-parts business, Mr. Lane said that if tariffs were imposed and stayed in place for an extended period, he would be willing to move his business to the United States. – a move that will probably leave most of it. current employees out of work.

Mr. Papp, the owner of the plastics company, said that although he opposed the tariffs, which would hurt his business, he was a fan of Mr. Trump and understood why the president-elect had argued that the tariffs were needed to help rebuild the industry. in the United States.

Regardless of what happens, Mr. Papp said, Canada and the United States will always remain steadfast allies.

“You cannot separate our countries,” he said. “They are stuffed together.”