As the U.S. and Canada attempt to negotiate a new trade deal to replace the more-than-two-decades-old North American Free Trade Agreement (NAFTA), Canadian Prime Minister Justin Trudeau isn’t rolling over, saying on Wednesday that he won’t rush into a U.S. trade agreement that’s wrong for his country. The top negotiator for the U.S. on Tuesday opined that Canada has not been making enough concessions as the two countries continue to hammer out the details of the new trade deal, which Trudeau indicated could even fall through altogether.
Mexico finalized a tentative new U.S. trade agreement last month, before the U.S. began engaging in separate negotiations with Canada, and the Trump administrations says that if the U.S. and Canada should fail to agree to new terms before a September 30th deadline, the U.S. could replace NAFTA with a new, bilateral trade deal with only Mexico.
“We will keep working as long as it takes to get to the right deal for Canada,” Canadian Prime Minister Justin Trudeau told reporters when asked about pressure from the U.S. to finish trade negotiations. He said that Canada would need to feel strongly in favor of “the path forward as we move forward – if we do – on a NAFTA 2.0.” He said that the tariffs the United States placed on steel and aluminum from Canada would need to be rescinded before any deal could be made.
What’s At Stake For General Motors
Apart from the number of automotive suppliers with operations in Canada (Magna, Linamar, Martinrea, etc.), General Motors might also be adversely affected by any failure between the U.S. and Canada to establish a new barrier-free trade deal because of its own handful of manufacturing plants in the country. Currently, General Motors operates Ontario’s CAMI Assembly, which produces the Chevrolet Equinox and GMC Terrain; Oshawa Car Assembly, which builds the Cadillac XTS, Chevrolet Impala, Chevrolet Silverado, and GMC Sierra; and St. Catharines Propulsion, which produces engines like GM’s High Feature V6, Gen-V small-block V8s, and six-speed automatics for the Chevrolet Malibu and Equinox.
Should a new U.S. trade agreement with Canada fail to coalesce, General Motors would be forced to rethink its commitments to those plants, either eating the higher costs that would come with new trade barriers, or finding/creating the necessary capacity in the U.S. to produce all of those products domestically. The requisite investments to make that happen would cost billions and create disruptive output interruptions, although labor costs between the U.S. and Canada are approximately the same, so there would likely be no lingering penalty beyond the initial investment.