Canada's Prime Minister Justin Trudeau speaks during a press conference while responding to U.S. President Donald Trump's orders to impose 25% tariffs on Canadian imports, in Ottawa, Ontario, Canada February 1, 2025. REUTERS/Patrick Doyle
NEW YORK: For North American companies, the “wait and see” moment on tariffs is over.
US President Donald Trump imposed a 25% levy on goods from Canada and Mexico, along with a 10% tariff on China, in what could be the opening stages of a full-scale trade war likely to create new headaches for executives that have been wrangling with higher costs for several years.
Tariffs on goods imported from America’s three largest trade partners could upend industries from autos to consumer goods to energy.
Executives have been able to deflect questions about dealing with tariffs before last Saturday’s announcement, and many wanted to avoid antagonising Trump’s White House after he took office. That non-response may no longer be possible.
“All chief executives are bewildered by these non-strategic tariff tantrums being directed at our closest allies instead of adversaries,” said Jeffrey Sonnenfeld, professor at Yale School of Management in New Haven, Connecticut.
Numerous global companies will report results this week, including Amazon, Ford Motor, Mondelez International and Owens-Illinois.
They will likely face a barrage of questions on how they plan to mitigate these costs.
Reuters reached out to numerous companies, none of whom would comment on the record about the tariffs.
Several industry associations did comment, though some were more critical than others.
The US Steelworkers union, the largest industrial union in North America, criticised Trump’s tariffs on Canada, citing some US$1.3 trillion in trade between the two countries.
“These tariffs don’t just hurt Canada. They threaten the stability of industries on both sides of the border,” union president David McCall said in a statement.
Automakers like General Motors and Toyota, could shift production from foreign factories to the United States, while companies like global aluminium giant Alcoa have suggested re-routing shipments to reduce the tariff burden.
Many companies accelerated shipments in the fourth quarter ahead of Trump’s return to office.
Offsetting tariffs is harder for smaller companies without global operations that need foreign parts.
Numerous aerospace and auto companies operate near the US-Canada border, while US refiners in the Midwest rely heavily on Canadian crude oil.
Collin Shaw, president of MEMA Original Equipment Suppliers, which represents more than 500 auto suppliers, said in an interview last Sunday that tariffs could introduce substantial delays into the production process.
“Even if (something) like a transmission is finally assembled in the United States, it’s sourcing products from all three countries,” Shaw said.
“A hiccup in just one of those not only will shut down a major component, like a transmission or an interior, but then you can’t build the rest of the vehicle.”
Tariffs are paid by importing companies, not foreign nations, as Trump frequently claims erroneously.
This week, the US president acknowledged that tariffs would cause short-term disruption as the costs are sometimes passed on to consumers.
Trump has pursued tariffs as a way of forcing companies to relocate to the United States.
But that is frustrating to firms that shifted production to Canada and Mexico in response to Trump’s tariffs on China in his first term – and now are set to be hit even after “nearshoring” closer to home.
“Our American automakers should not have their competitiveness undermined by tariffs that will raise the cost of building vehicles in the United States and stymie investment in the American workforce,” said Matt Blunt, president of the American Automotive Policy Council, which represents Ford Motor, General Motors and Stellantis. — Reuters
