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)
Copyright (c) 2018 Dow Jones & Company, Inc.