How Will President Trump's Angry Response To Canadian Ad Affect Autos?

I was watching the Major League Baseball American League Championship Series between the Toronto Blue Jays and Seattle Mariners the other night when I saw the ad. The province of Ontario remixes a speech by the late Republican president Ronald Reagan in which Reagan blasts tariffs as a bad economic idea, and sets the words against images of blue-collar workers doing blue-collar work things.

I had no idea that the ad would provoke a response from current President of the United States Donald Trump. That was an oversight on my part.

Trump has decided to end all trade talks with Canada, accusing the province of misstating facts and somehow influencing U.S. court decisions.

Perhaps Trump isn't really responding to the ad so much as he is to Canadian Prime Minister Mark Carney's push to double Canadian exports to non-U.S. countries as a way to get around negative impacts, real or perceived, from Trump's tariffs.

From the Associated Press:

Trump posted, “The Ronald Reagan Foundation has just announced that Canada has fraudulently used an advertisement, which is FAKE, featuring Ronald Reagan speaking negatively about Tariffs.”

“The ad was for $75,000. They only did this to interfere with the decision of the U.S. Supreme Court, and other courts,” Trump wrote on his social media site. “TARIFFS ARE VERY IMPORTANT TO THE NATIONAL SECURITY, AND ECONOMY, OF THE U.S.A. Based on their egregious behavior, ALL TRADE NEGOTIATIONS WITH CANADA ARE HEREBY TERMINATED.”

To be clear, Reagan DID say what he said in the ad, but not in the order in which the ad presents his speech. So that isn't fake, as Trump claims, though the ad does change the speech around to make its point. It also appears that the Province of Ontario was under no obligation to get permission to use the speech for the ad.

As for the reference to influencing court decisions, the Supreme Court is set to rule on the legality of Trump's tariffs early next month. Two lower courts have said the administration cannot unilaterally levy tariffs using an emergency powers law.

This matters to the automotive industry because of the complex global supply chain that intertwines the U.S., Canada, and Mexico. Not to mention that lots of vehicles are produced in Canada and Mexico and sold in the U.S. And vice-versa.

Again, from the AP:

More than three-quarters of Canadian exports go to the U.S., and nearly $3.6 billion Canadian ($2.7 billion U.S.) worth of goods and services cross the border daily.

That, of course, includes cars and car parts.

Carney had met with Trump earlier this month to try to improve trade relations, and the two countries and Mexico have been getting ready to review the U.S.-Mexico-Canada Agreement. That trade deal was negotiated by Trump during his first term as POTUS, but he's apparently no longer happy with it.

As it is, Canadian-built finished vehicles that aren't compliant with the agreement get hit with a 25 percent U.S. tariff.

Ontario Premier Doug Ford has been fighting American tariffs with efforts such as surging prices of electricity sold to the U.S. Trump retaliated by doubling tariffs on steel and aluminum.

The trade war has been tough on autos, as both Trump's tariffs and retaliatory levies from Canada are likely to lead to raised prices. Canada did, however, allow some carmakers to import a set number of vehicles. That's a process known as remission quotas.

Ontario is home to much of Canada's automotive production, so the province could lose a lot due to the trade wars. Stellantis, to cite just one example, is looking to move a production line from Ontario to Illinois.

That move to Illinois and GM's decision to stop production of BrightDrop vans in Canada due to an apparent lack of demand has also angered Ontario officials. As part of the remission quotas that exempted the automakers from tariffs, the OEMs had to continue building vehicles in Canada and had to finish any planned investments in the country.

As punishment, Canada is lowering the amount vehicles that can be imported tariff free -- GM by 24 percent and Stellantis by 50 percent.

While the countries tussle over where cars and car parts are built -- and thus, where the jobs will be -- it does seem clear that consumers on both sides of the border are likely to be hit by higher prices on new cars, as well as the parts needed to service and repair older vehicles.

[Image: noamgalai/Shutterstock.com]

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