Windsor-Essex companies among hardest-hit in U.S.-Canada tariff war

Article content

“At first, when someone says, ‘Let’s impose tariffs on foreign imports,’ it looks like they’re doing the patriotic thing by protecting American products and jobs. And sometimes for a short while it works — but only for a short time.  … Markets shrink and collapse; businesses and industries shut down; and millions of people lose their jobs.”  

Article content

Article content

— Excerpt from a radio address by President Ronald Reagan in April 1987.  

Article content

Those remarks, by one of the Republican party’s most revered presidents, are reverberating around social media sites as the tariff wars take shape.  

Windsor is on the front lines of those tariffs — both ways, as it turns out.  

Windsor will be the third-hardest Canadian jurisdiction hit by American tariffs, mainly because automotive and parts manufacturing will be the second-most negatively impacted sector, according to a report by the Canadian Chamber of Commerce in February. 

One estimate concluded the tariffs and counter-tariffs could add $6,000 to the price of a new vehicle.  

Export tariffs are tough enough, but the impact on goods coming into Canada as a result of retaliatory tariffs also looms large over Windsor-Essex.  

Article content

The region had 1,574 importers of products from the U.S. in 2023, up from 1,218 in 2021 — more than Halifax, according to data from Statistics Canada compiled by Postmedia on the volume of goods imported into Canada through Windsor.  

About $14.4 billion worth of goods was imported from the United States into Windsor in 2023, up from $10.9 billion in 2021, more than Hamilton and Edmonton, and almost as much as Vancouver.  

There is no way of knowing the volume of goods that remains in the region, versus how much is shipped elsewhere, but it’s clear — especially with the scale of the local auto industry — that imports from the U.S. are a vital part of the local economy.  

Canada stands poised to level tariffs on imported goods from the U.S. that would have a piling-on effect should more tariffs come into full force on April 2, as President Donald Trump has threatened. 

Article content

Article content

Louis Jahn, president of Tecumseh-based Jahn Engineering and head of the Canadian Tooling and Machining Association, says the effect on members will be huge.  

“The lion’s share of commerce in Essex County is mould shops, dye shops, automation companies. And those particular companies, they buy billions of dollars (worth of goods) from the States every year,” said Jahn.  

The result, he said, will be a contraction of the mould and die industry, and those who remain will look to China and South Korea for materials.  

“All these mould shops and die shops will be a fraction of the size,” said Jahn. They’re going to be either shut down or they’re going to be a fraction of the size they are right now.”  

The rest will look to Asia for materials because there is no way the U.S. could shift enough production to domestic sources, he said.  

Article content

“It’s going to be a huge gateway to China,” Jahn said. “A lot of the tooling and the moulds that’s currently sourced to Canada from United States … it’s going to go to China because the Americans don’t have the infrastructure or the manpower to do what we’re doing here in Windsor. They just don’t have the resources. 

“We’re already seeing the orders go to China.”  

Layoffs have already begun in the industry, he said.  

Local businesses in the construction industry looking to bid on tenders are facing a serious challenge because of the uncertainty of more tariffs, said Jim Lyons, executive director of the Windsor Construction Association.  

“Right now, with all that uncertainty, it is very difficult to price jobs.  

“Some project tenders closed recently, and some of the subcontractors have been trying to get pricing from various steel manufacturers. They’re getting comments back that (say): ‘Here’s my price for today.’ 

Article content

“There’s no guarantees of their prices and how long they’re going to leave them where they’re at, because the raw material predominantly is out of the U.S., and if tariffs, all of a sudden, are imposed on that material then their price is going to change.”  

Canada can supply a lot of its own wood, but some steel would still need to be sourced elsewhere, he said.  

With major local projects such as construction of a new hospital, originally estimated to cost more than $2 billion, and a possible interchange bridge to be built over E.C. Row Expressway, tenders will be full of uncertainty, Lyons said.  

“It’s going to be really challenging to the bidders to know exactly what to price it at based on some of the component uncertainties.”  

Article content

The association is trying to work with municipalities to create language that “reasonably identifies the risks and that will not bankrupt a company if they do decide to bid a job and the tariffs go up,” said Lyons.  

“Unfortunately, there has to be larger contingencies for clients if they want things done.”  

Some contractors are refusing to tender on some projects if they don’t get a contract from a client that will consider contingencies in the case of higher costs due to tariffs, he said.  

Joy Nott, partner, trade and customs practice at KPMG Canada, works with businesses to create plans on how to address tariffs. A former president of the Canadian Importers and Exporters Association, Nott says businesses need to fully understand the cost of tariffs to their operations and make plans for mitigation.  

Article content

For example, Canada has a remissions process that can allow businesses an exemption from import tariffs if they can show they’re devastating to the business, Nott said. 

“Companies who feel that paying the Canadian tariffs, if it would be existential to their existence, they can actually apply to the Department of Finance to get an exclusion from the Canadian tariffs,” said Nott. “You have to have a strong business case. It can’t just be that, ‘I’m going to suffer financial losses.’”  

Canada also allows importers to have their tariffs refunded if they import a product that’s subject to a retaliatory tariff and then export it out of the country. The U.S. does not allow that kind of refund, Nott said.  

“The Canadian government is not trying to punish people with the tariffs. They’re trying to make sure that the United States feels as much pain as Canada can put on it as retaliation for the tariffs on us.”  

Article content

Nott offered businesses several tips on how to deal with the tariff climate. “The first thing that they need to do is to fully understand the impact of the tariffs,” she said. “Often, when I talk to companies, and I say, ‘Have you run the numbers? Do you actually know what the impact to your company is going to be?’ They have high level, vague ideas as to how much the tariffs are going to cost them.”  

Businesses should also map out supply chains and look for substitute suppliers that will not be affected by tariffs, Nott said.   

Companies should be “looking to see the overall business model that comes with mapping your supply chains, really understanding all the streams of business that they have, who are they buying from, who are they selling to,” she said.  

Article content

“Once that’s sort of put on a whiteboard, so to speak, often there’s revelations that will happen. Companies will realize that they do have options of seeking new markets or looking for suppliers in different places than the U.S.”  

Federal government agencies have set up several programs to help businesses deal with tariffs.  

Export Development Canada has created a $5-billion program to help Canadian businesses diversify their trade in overseas markets and manage risks from tariffs.  

The Business Development Bank has made available $500 million for advisory services to help business pivot and mitigate the effects of tariffs.  

Farm Credit Canada is providing $1 billion in new lending to support the agriculture and food industry, offering access to credit lines, term loans, and payment deferral options. 

Article content

Still, the business sector in Canada feels it’s resilient, said Nott. A survey of 600 companies across multiple sectors in February in Canada showed two thirds of businesses can withstand a year or more of tariffs. Another 30 per cent said it would cause “great financial pain.”  

But only about three per cent said tariffs will put them out of business.  

About 86 per cent of those surveyed support retaliatory tariffs, even though they know it will hurt their own operations.  

“They’re also looking at … potentially new suppliers and new markets, because there’s a reality that’s dawning,” said Nott.  

[email protected] 

Article content