Midweek podcast: Retaliatory auto tariffs could cripple Canada

As Canada mulls over possible retaliatory options should the U.S. impose tariffs on vehicles, experts fear the Canadian economy couldn't withstand a dollar-for-dollar response.

"We just can't afford it," Michael Hatch, chief economist at the Canadian Automobile DealersAssociation, told The House.

Though 25 per cent tariffs on autos are just a threat at the moment,Canada joined Mexico, Japan, South Korea and EU countries in Geneva this week to plot a path forward should President Donald Trump move forward with the tariffs.

Deputy international trade minister Timothy Sargent confirmed to CBC News he wasattending the meeting on Canada's behalf.

The Trudeau government has said it would respond to auto tariffs with its own countermeasures, but there are no details about what those actions would look like.

The federal government announced $16.6 billion in retaliatory tariffs on American products after the U.S. imposed duties on Canadian steel and aluminum at the beginning of the summer.

Trump's auto tariffs face opposition from U.S. industry

6 years ago

Duration 2:26

It comes as the U.S. Department of Commerce holds a public hearing on whether imported cars are what Trump claims they are: a national security threat.

But Hatch says taking a similar approach to auto tariffs could cripple the Canadian auto industry.

Auto tariffs would hit American consumers first and if Canada imposed the same kind of tariffs, Canadian consumers would take the hit from higher prices and taxes on vehicles, he explained.

"We can't afford to then turn around and then through not wanting to appear weak turn around and impose the same tax on ourselves," he said.

Hatchcalled the U.S. tariffs "a solution in search of a problem," with the administration constructing more barriers as many U.S. officials speak out in opposition of fuelling a trade war.

The U.S. Department of Commerce also held hearings to determine whether they should impose auto tariffs. Almost all of the witnesses said it would hurt the American car industry and consumers.

If President Donald Trump decides to proceed, Hatch said there should certainly be a Canadian response, but it doesn't have to include "using the blunt hammer of dollar-for-dollar retaliation."

Industry players in Canada have met with federal government officials to discuss the appropriate response, though no formal plans have been made public.

"Certainly we have to be prepared for the worst and hope for the best in this situation," Hatch said.