If the soft approach doesn’t work with Trump, we must try the hard

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Jerry Dias is a retired national president of Unifor and helped in the negotiation of the Canada-United States-Mexico Agreement in 2018. Jordan Brennan is a former chief economist at Unifor.

On Wednesday, U.S. President Donald Trump threatened to raise the tariffs he has imposed on Canadian cars yet again. It’s part of his crusade against free trade, which he blames for a loss of manufacturing jobs in the United States.

But if trade liberalization is the main culprit behind deindustrialization in the U.S., we should expect globe-trotting manufacturing giants such as General Motors GM-N to have shed comparatively fewer jobs than the domestic manufacturing sector, as jobs relocated over borders. The data tell a different story.

GM’s global headcount mirrors the decline in U.S. manufacturing jobs. Both rose steadily from the 1950s through the 1980s before plummeting. Since the 1980s, America has shed nearly seven million manufacturing jobs – one in three. GM’s global work force shrank a whopping 82 per cent over the same period, though its annual output per worker soared from seven vehicles in the 1980s to 38 by 2023 – an astonishing 500-per-cent-plus increase in productivity.

That’s not the result of offshoring, but rather automation. The White House understands this but is putting politics before facts.

This raises an ominous question: Are the tariffs a short-term ploy to win better trade terms or a long-term strategy to repatriate industry, raise revenue and fund tax cuts? We fear the latter. If so, Mr. Trump’s tariffs are a predatory, zero-sum policy. America can only “win” if other countries lose. That includes Canada, whose auto industry is caught in the crosshairs.

Our next federal government must make it clear that Canada will not surrender its auto industry. Industry executives are nervous and need assurances that Canada will not forfeit its share of North American auto production without a fight.

We must start with the “soft,” prototypically Canadian approach that is patient diplomacy. On its own, Canada is unable to inflict enough damage on the U.S. to pose a credible threat. We account for less than 2 per cent of new vehicle sales globally, which means the countertariffs imposed by Ottawa will have a minimal impact on the U.S. What’s more, countertariffs hurt Canadian consumers and mirror the self-defeating logic of Mr. Trump’s approach.

If Canada can offer Mr. Trump a few symbolic “wins,” like paying more into NATO, phasing out supply management and partnering on critical minerals – things we should be doing anyway – we might defuse the situation constructively.

There is a more muscular option in keeping with the Trump playbook, however, which we keep in our pocket but should not be afraid to use: escalation.

To be sure, there is danger in this more aggressive approach. Escalation can spiral out of control, as the tariff war between the U.S. and China has made clear. In teaching the White House about this law, Canada must diligently avoid having its response backfire.

But in conflict situations, escalation is tactically useful because it pushes the parties toward resolution.

To that end, Canada should form strong alliances with Mexico, the U.K. and Europe, which are also frustrated with Washington’s actions.

Part of the strategy targets American public opinion. GM and Ford don’t assemble vehicles in Canada because America is “subsidizing” Canada, as Mr. Trump has repeatedly claimed. They do so because it’s efficient. Factoring in exchange rates, health insurance costs in the U.S. and productivity, Canada is more competitive than the U.S. If Mr. Trump succeeds in forcing production south, American consumers will be left with the most expensive cars ever built. Do Trump voters want to spend more on their next vehicle?

There’s another card to play in this more aggressive plan. The North American auto industry is tightly integrated. If Canada and Mexico seal their borders, restricting the export of critical auto parts, U.S. assembly lines would be instantly crippled. This would yield two results: First, no imports would mean no tariff revenue from auto parts, so no money to fund Mr. Trump’s tax cuts; second, the very workers who elected Mr. Trump will be laid off – something they didn’t vote for.

Mr. Trump will have inspired a united attack on the U.S. economy, sending his tariff policy into disarray and alienating the very people who delivered the White House to him. This more aggressive approach has the benefit of tacit support from the auto industry, too, which does not want to cede managerial control over production decisions to the White House.