Tariffs as high as 25 percent on vehicles and parts entering the United States could shut down North America's entire automotive industry, according to Flavio Volpe, president of the Automotive Parts Manufacturers' Association.
A 25 percent tariff, being threatened by U.S. President-elect Donald Trump, is so punitive and industry margins so thin that automakers and suppliers may simply halt production instead of booking losses, while turning to the courts for a resolution, he said.
"He picked the wrong number. It's so high that it's meaningless in automotive. … You may as well have said 200 [percent], said a million, no one's going to book those losses," Volpe said.
Anxiety among Canadian suppliers is growing as Trump dials up the rhetoric and prepares to retake the White House on Jan. 20, Volpe said, but in an industry with razor-thin inventories, the amount of pre-planning companies can undertake is limited.
Kevin Hallahan, vice president of marketing and investor relations at Linamar Corp., said the die casting company has prioritized getting U.S. orders filled ahead of the inauguration within its industrial division, but that automotive's just-in-time delivery model makes getting in front of tariffs infeasible.
The Guelph, Ontario-based supplier is engaged with the Canadian government to help work through the threat, and it remains confident the highly integrated nature of North America's auto sector will allow cooler heads to prevail, Hallahan said.
"The [automakers], they don't have real good switching abilities. If they selected a supplier to be the supplier of a particular powertrain component or structural component of the vehicle, there's been a lot of testing and validation on that before the vehicle reached its first day of production."