Instead, Supply Chains Are Simply Being Rerouted Around the United States of America
Donald J. Trump’s tariff regime was meant to force manufacturers to move production to the United States. Unfortunately, this hasn’t worked out that way. What is transpiring now is for Japanese and Korean and European car manufacturers, to move, not their production but their supply out of America, and to serve the Canadian market from the country of origin.
Trump’s tariffs have actually decreased American automotive manufacturing, not increased it, and recently, two Japanese brands have stopped importing vehicles from the United States and are serving the Canadian market from Japan, just as they used to decades ago.
On top of this, Canada’s diminishing production of U.S. owned vehicle manufacturers, Ford, GM and Stellantis has created surplus manufacturing capacity that is being replaced by Japanese and Korean car manufacturers, as has been the case with Honda and Toyota.
If Canada drops the EV tariff on Chinese vehicles, it is likely that by so doing Chinese manufacturers may well look at the production capacity that can be retooled and incorporated into North American based manufacturing in Canada.
Canada has all of the necessary components for a Chinese automaker to take advantage of including a highly trained workforce, raw materials, such as steel and aluminum, EV battery production and all of the minerals necessary to create EV batteries. Now that the big three North American companies are moving out of Canada, albeit slowly, Canada’s plants in Oshawa, Windsor and Oakville, in particular, may well be bought by Chinese manufacturers.
A New Trend Is Occurring
Recently, Suburu announced that it was going to supply the Canadian market from Japan and discontinue supply from the United States, thereby reducing the production output from the American plants.
Earlier this year, Mazda did exactly the same thing with its production of the CX-50 hybrid, which was the only model being built in the United States. It encountered lost sales, essentially because of the 35% countervailing duty that Canada imposed on US vehicles entering Canada, thereby making those autos uneconomical to sell in Canada.
Once foreign manufacturers like Kia, Hyundai, Subaru, Toyota and Honda stop importing vehicles to Canada, that ‘total production’ from the U.S. is no longer viable for export to Canada and direct shipments from Korea replace American production.
And while this is happening in the automotive sector, the same applies to a whole slew of products whose parent companies are not American.
The end result is less production from the U.S. and more direct shipments to Canada. In addition, third party manufacturers can move their ‘plants’ from the U.S. to Canada to serve the market, simply reducing the capacity of production.
This isn’t only happening in Canada. It’s happening in Mexico as well.
The net effect is that supply chains are aligning themselves to operate and provide product by ‘skirting’ America. And once these new paths of manufacture and supply have been established, there is absolutely no incentive to return to the United States. Particularly in relation to EV’s, Hybrids and Plug-in Hybrids.
Canada is adopting EV’s at a much faster rate than the United States, and now that Donald J. Trump has imposed additional costs on their manufacture and doubled-down on the manufacture of ICE vehicles by the big three, it is obvious that very few of these vehicles will be either manufactured or adopted within the United States.
The chief beneficiary of these actions by the United States will be China, as Chinese EV’s are cheaper, technologically superior with greater range and faster charging times. For Canadians, buying a Chinese EV will be a win-win situation, as electrical charging costs in Canada are appreciably cheaper than in the U.S. and the Canadian government is reintroducing EV subsidies to manufacturers in 2026.
It would seem that Donald J. Trump, the ‘master of the steal’, has inadvertently put a bullet through the brain of the U.S. automobile manufacturing sector.
One simple equation explains exactly what the U.S.-based manufacturers face.
A Chinese automotive manufacturer pays his employees, on average, $2.17 U.S. per hour. The average salary of a U.S. autoworker is $28.02 per hour, without benefits, pensions and unemployment benefits. Chinese manufacturing is also more robotically intensive, so the actual number of employees to manufacture a vehicle is also lower.
America, whose greed instituted the changes now taking place has ensured that they will never be the beneficiary of the process. The U.S. will lose market share and make the vehicles it produces in the U.S. for the domestic market simply more expensive and inferior in relation to the competition.
Stupid is as stupid does.
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