By Chester Dawson | Photos by Rachel Woolf for The Wall Street Journal 

WINDSOR, Ontario -- For decades, this border town has tied its fortunes to the success of the U.S. car industry. Now with President Trump threatening to impose a hefty tariff on Canadian-made vehicles and auto parts, residents and business owners are worried those ties, already strained by steel tariffs from both sides of the border, could soon be ruptured.

Some car-parts manufacturers and other businesses in this industrial city adjacent to Detroit are starting to feel the effects of the White House's recent trade actions.

White House officials have argued that the tariffs' effects on U.S. consumers will be small and broadly dispersed. But for foreign locales such as Windsor that heavily depend on trade with the U.S., the impact may be acute.

In a recent tweet, Mr. Trump singled out the Canadian auto industry, writing he would "tax" cars built there if U.S. officials can't strike a deal on the North American Free Trade Agreement. Mr. Trump has said he wants to impose a tariff of up to 25% on foreign-built cars and auto parts imported to the U.S., which could include those from Nafta partners.

"Everybody is talking about it," said Bobby Hanslin, 51 years old, a longtime worker at Fiat Chrysler Automobiles NV's massive assembly plant in Windsor. "Everybody is worried."

The plant, which employs 6,100 workers, is Canada's largest auto factory and builds minivans mostly for export to the U.S. Employees and local officials say they are concerned a tariff could force Fiat Chrysler to rethink whether it wants to continue building as many vehicles in Canada.

"If we ever lost Chrysler, Windsor would be a ghost town," said Duncan McGregor, 59, a skilled tradesman who has worked at the plant for 25 years and has a daughter employed on the assembly line.

Fiat Chrysler declined to comment.

With a population of about 200,000, Windsor sits across a narrow stretch of river from downtown Detroit and is known as Canada's car capital due to its proximity to the heart of the U.S. auto industry. Its connections to the Motor City run so deep that many Windsor residents root for Detroit sports teams, and about 6,000 Canadians commute to the U.S. daily across the Windsor-Detroit border.

"It's the only Canadian suburb of an American city," said Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association.

The city's auto sector has flourished under Nafta, with dozens of auto suppliers and hundreds of smaller tool shops making equipment used in car factories over the years. Windsor is also home to a Ford Motor Co. engine factory, which employs roughly 1,500 workers. The auto industry makes up 17.3% of Windsor's gross domestic product, according to the Conference Board of Canada.

Mr. Trump, however, sees Canada's rebounding car sector as a bargaining chip in Nafta renegotiation talks and has pressured manufacturers to locate more work in the U.S.

The White House didn't respond to a request for comment.

The trade showdown comes at a time when Windsor's economy has rebounded strongly. The city has added 7,800 jobs in the past four years, mostly in the automotive sector, nearly offsetting the 8,600 jobs lost during the recession, according to labor data. Its unemployment rate dropped to 5.6% last year, from 9.8% in 2015.

Amid the uncertainty, civic leaders have held town halls with residents and business owners to discuss the potential fallout and push Ottawa to resolve the trade row.

"Everyone here takes the U.S. threats very seriously, but no one is quite sure what to make of them," said Windsor Mayor Drew Dilkens.

For some auto-parts suppliers in Windsor, Mr. Trump's efforts are already being felt. Local business leaders say some manufacturers are shelving plans to invest or expand amid the uncertainty and tariff-related price increases on raw materials such as steel. The Canadian government has imposed a 25% duty on steel from the U.S. in retaliation of Mr. Trump's metals tariff.

Jonathan Azzopardi, president of Laval Tool and Mould Ltd., said he expects a 6% hit to his bottom line this year because of higher steel costs. Any additional tariffs, such as the ones threatened by Mr. Trump, would only increase costs even more, making it harder for his company to compete with U.S.-based suppliers, he said.

"It will be worse for us than some because our main clients are in the U.S.," said Mr. Azzorpardi, who also serves as chairman of the Canadian Association of Mold Makers.

Some precision toolmakers say U.S. clients are starting to re-evaluate whether they should place orders with Canadian firms, worried they might have to pay import duties on Canadian-built components if Nafta no longer protects them from U.S. tariffs.

"We're missing opportunities every week that goes by," said Tim Galbraith, a sales manager with Cavalier Tool & Manufacturing, a Windsor-based maker of steel molds used by firms to manufacture plastic car parts. "Customers ask what kind of [price] guarantees we can give them, but I can't tell them what's going to happen in six months."

Small businesses are also fretting about new trade barriers. Sam Bakkal, 43, an employee of Gemini Market, across the street from the Fiat Chrysler factory, said most of the convenience store's sales come from plant workers. "When the plant is slow, we are slow," he said.

Write to Chester Dawson at chester.dawson@wsj.com

(END) Dow Jones Newswires

August 19, 2018 07:14 ET (11:14 GMT)