According to CBC Canada, Trump spokesman Sean Spicer said: “When a company that’s in the U.S. moves to a place, whether it’s Canada or Mexico, or any other country seeking to put U.S. workers at a disadvantage,” then the incoming U.S. president “is going to do everything he can to deter that.”
President-elect Trump’s protectionist policies may seem to be good for American workers, keeping manufacturing jobs within our borders, but doing so at the expense of friendships with our border neighbors, Mexico and Canada may end up hurting all of us. And Spicer said the policy affects all countries, regardless of the industry.
While Trump takes to Twitter to lambaste companies, by name, for opening manufacturing plants in Mexico, American workers are given the “feel good” impression that he is looking out for their interests, and that is all well and good. But to have Sean Spicer pointedly add Canada to the mix was irresponsible, to say the least.
For years, American and Canadian automakers have had an integrated relationship, with auto parts freely moving back and forth across our border. CTV News points out that on average, a vehicle can go back and forth across the border as many as six times while under production. Can you imagine how much the finished vehicle would cost the consumer if these punitive taxes were added?
During recent contract negotiations, GM, Ford and Fiat Chrysler all committed to operations in Canada. And last week, Honda announced plans for a $500 million investment at its Alliston, Ontario production facilities. All in all, in the past few months, automakers have said they will invest over $2.0 billion in Canada.
Canada’s Justin Trudeau may think he will be able to work with the new president, but he had better watch his back. House Speaker Paul Ryan, one of Congress’s most powerful Republican lawmakers, crafted a blueprint tax policy paper that would revamp our tax code.
The paper points out that a border adjustment tax would boost domestic production and U.S. exports. It would also stop companies from moving outside the country. Basically, the border adjustment tax would tax imports to the United States at the corporate tax rate, and exempt from taxation the profits made when companies export from the country.
To put it in perspective, a car that was assembled in Canada and then imported to the United States would be taxed at 20 percent. Meanwhile, the U.S. engine exported to Canada would not be taxed, according to the Globe and Mail.
“Under current law, if you import something, that is deductible like any other business expense,” said Hendrik Brakel, senior director of tax policy with the Canadian Chamber of Commerce. “Under a border tax, you can no longer deduct the cost of imports. It effectively ends up being a 20-per-cent tariff,” he said.
Could added tariffs hurt Canada? Yes, they could. According to the Canadian Vehicle Manufacturers’ Association, one in seven Canadians is employed in the automotive industry. About 85 percent of vehicle production and 60 percent of auto parts in Canada are marked for export.
“We have a lot of jobs at stake,” Ian Lee, a professor at Carleton University’s Sprott School of Business, told CTV News. Referring to Trump, he added, “He’s going to do everything possible to bring jobs back to the U.S. to benefit Americans. If we are run over in the process, that’s just unfortunate, we become roadkill.”