Steel Waiting: What American Tariffs May Mean for Canadian Automotive

At Strathcom, we make a point of taking our client’s concerns seriously, which means staying up-to-date with the Canadian auto industry that keeps our (and our clients’) bread buttered. Talking to clients in recent months revealed a widespread concern over one issue in particular: the looming prospect of American trade tariffs that may hold serious economic implications for Canada’s automotive sector.

With the long-standing North American Free Trade Agreement (NAFTA) as a target of considerable “gutting”, the big fly-in-the-ointment takes the form of aggressive tariffs on Canada’s steel and aluminum, effectively stabbing the very heart of our nation’s automotive sector. Taking aim at such a significant economic driver generates huge concern throughout Central and Eastern Canada.

Tariffs By The Numbers

The implementation of tariffs on Canadian steel and aluminum on June 1st dampened palms of several Canadian auto industry titans for these reasons:

• Imposing 25% and 10% markups on each resource respectively, carries the enormous threat of a projected $3.2 billion/year gouge out of the Canadian economy.
• At the beginning of July, estimates made by a Canadian car dealer representative group suggested that retaliatory measures from the Canadian government could inflate the purchase price of a new vehicle by between $5,000 and $9,000.
• Beyond its impact on consumers, the Canadian Automobile Dealers Association (CADA) forecasted that American trade actions could potentially jeopardize between 25,000-30,000 positions at new vehicle dealerships, in addition to the more than 100,000 manufacturing jobs that would also be in danger.

With the subsequent and presently-looming threat of sweeping auto tariffs, the stakes are ratcheted-up immensely. The truth of the matter is, the economic impact of car tariffs would absolutely dwarf the steel and aluminum tariffs already imposed.

Aggressive Negotiations

Earlier this week, American and Mexican parties involved in the NAFTA renegotiation saga have made significant progress on reaching a bilateral trade deal that could leave Canada adrift and force them to forge a deal with its North American partners, individually. The potential for playing the Canadian automotive manufacturing sector as a bargaining chip to appease perceived sleights on American trade may become a real possibility. It’s only prudent as dealers to be cognizant of the looming uncertainty and respond to consumers’ concerns with a marketing message that benefits them, and to prepare for a wide range of potential economic scenarios.

Capitalizing on Uncertainty

Despite the bleak possibilities, consider this: with the price of vehicles expected to rise significantly from American tariffs on vehicles and automotive parts, in-market consumers are keeping a close eye on the news. As a retailer, it might make sense to adjust your marketing message to account for the trepidation buyers are now feeling, right?

Rather than reacting to the current climate by completely overhauling your marketing message in online search and advertising campaigns, consider a smaller-scale approach to capitalize on the uncertainty. Online advertising is cheaper at the beginning of the month and manufacturers usually take a few days to disseminate their national offers, meaning online ad space will come readily available at a lower cost. Allocating a few hundred dollars to spend on an ongoing sale-style campaign for a platform like Facebook presents an opportunity to take advantage of a favourable situation.

Running a “why by” message highlighting the threat of a drastic shift in the Canadian automotive retail market means maximizing the potential opportunities of the situation. That’s why we suggest giving Strathcom a call! Let us help you get your message across and alleviate any customers’ questions or concerns.