By Hugh Holland
It was political theatre at its best. President Trump strode into the Rose Garden on April 2nd and delivered his Liberation Day address with his egotistical jaw thrust out in a Mussolini-like pose. “America is in a mess because no other president has ever done what I am doing to stop the rip-offs” (except Herbert Hoover with his Smoot-Hawley Tariffs in 1930 that blew the Great Depression into a worldwide event). “It’s going to be great” (except that it will be a long time before any other country trusts or respects the USA again). Union leaders in MAGA hats (flown in at taxpayers’ expense), cabinet members, and Republican congressmen clapped in awe at every word.
The USA (with GDP per capita of $81,695 (at PPP) in 2023) is tired of being ripped off by Vietnam (GDP of $15,195 per capita), India (at $10,176), and Bangladesh (at $9,066), so Trump is applying large retaliatory tariffs on those and a long list of other countries. Let’s look at some simple logic as it pertains to Canada’s production of key items with a 25% Trump tariff.
Automotive
| 2024 | Cars built (m) | Cars Sold (m) | Average Ind wage | + Health Insur Per family |
| Canada | 1.90 | 1.92 | $39,200 US | |
| USA | 10.60 | 15.9 | $68,000 US | $23,968 |
| Mexico | 3.99 | 1.35 | $16,000 US | |
| Asia & Europe | 2.68 | $46,000 to $70,000 US | ||
| Total North Amer | 19.17 | 19.17 |
Over 100 vehicle models are sold in North America. Rather than producing all 100 models in all three countries, each country is more efficient when manufacturing specific models and trading the others to minimize duplication of expensive tools and equipment, as well as parts supply chains. Together, Canada and Mexico make 37% of the 15.9 m light-duty cars and trucks sold in the US, so in simple terms, the 25% tariff adds 37% x 25% x $48,000 average US price = $4,440 to each vehicle sold in the USA.
The average gross profit on new light-duty vehicles sold in the USA is 3.9% x $48,000 = $1,872. Car companies will have to decide between three options: 1. Absorb the tariff and incur a loss of $2,568 per car. 2. Raise the price by $4,440 and lose some sales, or 3. spend $68,000 – $39,200 + $23,968 = $52,768 extra per year for every job moved to the USA + the cost and 2 to 3 years for adding plant and equipment capacity and supply-chain organization. Which option will they choose in Trump’s brilliant plan? They will choose option 2 until they can be assured of a stable vs unstable business environment, but the reduction in sales will reflect in lower shareholder’s equity and higher trickle-down inflation.
Steel
Twenty-three per cent of US steel imports come from Canada due to the abundance of iron ore in eastern Quebec that is economically shipped to steel mills and customers via the St Lawrence Seaway. 60% of the US nickel supply used to make stainless steel comes from Canada. If the US doesn’t want our steel, we can likely pivot to European and Asian markets.
Aluminum
Forty per cent of U.S. aluminum imports come from Canada. Production of aluminum requires economical access to receive bauxite ore from South America and massive amounts of electricity for smelting. The giant smelter on the Saguenay River in eastern Quebec is unique and unmatched with those assets. Apparently, Airbus in France will be happy to take all the aluminum Canada can supply.
Hugh Holland is a retired engineering and manufacturing executive living in Huntsville, Ontario.
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Thanks Mr Holland. I just happened upon news about the grand opening of the Hyundai Megaplant America dedicated to production of their electric vehicles Ioniq 5 and 9 in a town south of Savannah Georgia. It is highly automated(robotics) and uses AI and says it is designed to priorize its human workers well being. Looks beautiful! Planned in 2022 and first came into operation October 2024, so all before the recent tariffs and policies of the current Trump administration. Reported to be bringing 15000 jobs to the area. All good news, but maybe not for Canadians who want one of those vehicles which may face our own tariffs now to get a US made car.
Trump’s tariffs have caused global markets to plunge because they can see the impact on businesses and consumers, and none of it is good. US businesses will largely suspend investment decisions due to the massive uncertainty, and costs to both businesses and consumers will rise significantly. The US Fed called this out and is likely to pause further rate cuts due to increased inflation risks. The opposite from what Trump was hoping for.
Hugh’s analysis for the auto sector could be done for other manufacturing sectors, with a similar conclusion. Companies will not abandon plants in much lower cost countries and replace them with new expensive ones in the US, as the business case is a big loser.
Just looking at how Trump’s tariffs were created speaks volumes about the lack of seriousness of his administration. They used the US’s trade deficit as a % of the targeted country’s US exports. You don’t have to be an economist to realize this is bogus. Yes the US has trade deficits with about half of the countries it trades with, but the main reason is not grossly unfair tariffs, as Trump claims. It’s largely driven by huge US demands for much cheaper foreign goods, as Hugh explains. The US’s large services trade surplus is also ignored.
So instead of focusing on the countries with the largest US bound exports and high import tariffs, he declares a trade war on the entire world. China is responsible for a quarter of the US’s goods trade deficit, and just 8 countries make up 80% of it. Canada isn’t among them. The actual tariff rate in most countries is under 10%.
Eventually the pain will reach a point where Republican voters say enough, and will pressure their congressional representatives to stand up to Trump and rein him in. How long that will take remains to be seen. In the meantime, the damage he is doing to the US’s reputation will long outlast him and his MAGA movement, with long term global consequences. Xi Jinping is smiling…
Trump is doing what it takes to make his country great again. We have always paid and received tarrifs. Lets get someone in Canada that hasnt pissed off Trump. He will talk and negotiate. Everybody is down on Trump. Alberta pays billions in tarrifs does anybody know that tarrifs are normal and all countries charge them. We need someone like Trump in our government to help make it better for Canadians and Canada after liberals spent so much of our taxpayers money over seas and on stupid things like a 5 million dollar ice rink no one could use. I could write tons of things the Libersls have dome to bankrupt Canada and Canadians. We have never been so broke and hopeless since the blind liberals. Open up your eyes people are look into what has happened and what is happening.
Hugh Holland’s recent piece on tariffs and trade under former U.S. President Trump is a timely reminder that political theatre often comes with a real economic cost.
Canadians need to look beyond the slogans and recognize the tangible consequences of returning to isolationist trade policies. As Mr. Holland pointed out, the U.S. depends on Canada for critical imports like aluminum, steel, and auto components — goods that support jobs and competitiveness on both sides of the border. Punitive tariffs don’t stop “rip-offs”; they disrupt supply chains, raise prices, and fuel inflation.
One of the most overlooked points — and I thank Mr. Holland for raising it — is that U.S. manufacturers actually benefit from operating in Canada. Thanks to our publicly funded healthcare system, supported in part by the GST, and our more competitive wage structures, American companies save tens of thousands of dollars per employee by keeping production here. That cost advantage is real — and it’s just one more reason why cross-border cooperation makes more sense than economic grandstanding.
It’s also worth recalling that in 2015, just before the federal election, the Harper government quietly sold off Canada’s remaining GM shares — assets originally acquired to protect Canadian jobs during the auto crisis. The shares were sold at a loss, and with them, Canada gave up valuable leverage in negotiating future investment and production decisions in the North American auto sector. That short-term move weakened our long-term economic footing.
Canada needs leadership grounded in strategy, not spectacle — leadership that understands global markets, defends national interests, and moves beyond reactionary politics. This moment calls for clarity, not theatrics.
Sincerely,
Lisa Brooks
Huntsville, Ontario
What really scares me is that 18% of Mr. Pierre Pollievre’s base voters are in favour of Trump and even the idea of Canada becoming the 51st. State? Am I right or totally misinformed?
Thanks Hugh. I have a better sense of what T’s tariffs mean for car production in dollars and cents. And good to know that Airbus in France will be happy to take all the aluminum Canada can supply.
Watching the MAGA seals clap in adoration as T delivered his liberation screed, I wondered why the GOP hasn’t listened to Ronald Reagan’s opinion – he died in 2004 – on tariffs?
His famous speech was based on his personally-lived experience with the Smoot-Hawley Tariffs that further exacerbated the effects of the Great Depression. There was a time not long ago when Americans in general venerated RR – why aren’t they heeding his words now?