Canada-U.S. trade talks back on but outcome unclear, auto parts lobby group head says

The head of Canada’s auto parts lobby group says Ottawa and Washington are engaged in talks about a possible trade deal but he’s not certain this will lead somewhere.

Flavio Volpe, president of the Automotive Parts Manufacturers’​ Association, said he learned in recent days of renewed discussions but cautioned it was unclear how intense these talks have grown.

“I understand the two sides are talking and the President has shown flexibility for strategic midterm interests, so maybe this is a fertile opening,” Mr. Volpe said. “We will wait and see.”

Last week, U.S. President Donald Trump exempted a number of Canadian goods from the 50-per-cent tariffs he imposed in August in order to help Maine Republican Senator Susan Collins’s re-election chances. These included Canadian paperboard cartons, plastic crates, plastic bags, refrigeration equipment and agricultural sorting machinery, among other products.

The White House said it would replace the exempted products with levies on other Canadian imports to keep the total amount of Canadian-made goods subject to border taxes the same.

“I think what the President did with Susan Collins was instructional. It says the White House is willing to be flexible in this last week presumably for a more favourable result in the midterms,” Mr. Volpe said.

While the Republicans appear on track to lose control of the House of Representatives, Mr. Trump appears to believe Republicans might be able to retain control of the Senate.

“A lot of those Senate seats that are in play are in states that are very dependent on the Canada-U.S. relationship,” Mr. Volpe said.

Canada walked away from the bargaining table in August after what Prime Minister Mark Carney later called a “bad deal” offered by the U.S. that “asked too much and offered too little.”

Mr. Trump told a rally in Port Huron, Mich., on Sunday that Canada had been “ripping off” the U.S. on trade and the U.S. had no choice but to impose levies on Canadian goods.

He said the trade dispute would be settled “pretty soon” and that Canada was “willing to give us anything at this moment.”

A spokesperson for Canada-U.S. Trade Minister Dominic LeBlanc’s office said the two sides “remain in constructive dialogue” on a “range of priorities. The spokesperson said Canada is ready to work constructively on a mutually beneficial deal that “respects Canada’s interests.”

Mr. Volpe cautioned against accepting similar terms that were offered in August. Reports of the elements of a deal on the table in August included a permanent 15 per cent tax on the non-U.S. content in automobiles assembled in Canada – instead of the current 25 per cent rate - but that the levy for mid- and heavy-duty trucks would remain at 25 per cent.

“I don’t think we should ignore any outreach. But the math hasn’t changed in two months so we need to be careful about what we entertain.”

Mr. Volpe said the profit margin for auto assembly in Canada in 2024, the last year before Mr. Trump returned to office, was 6 per cent.

Assuming a Canadian-made automobile has 50 per cent non-U.S. content, a 15-per-cent tariff would still work out to about 7.5 per cent of the value.

“Automakers have to see a path to profitability here in the mid- to long-term,” Mr. Volpe said.

He said a 15-per-cent tariff might work while auto assemblers are fulfilling already-locked in contracts for existing model cars.

But he said when negotiations begin for automakers to retool for future models, the 15-per-cent tariff may be too prohibitive.

“Retooling for new models is a capital heavy decision and if you are certain you are going to lose the money and you’re not a charity, then the risk is too high,” he said.

With reports from The Canadian Press