It’s worth remembering that Canada wasn’t exactly pleased when, under former prime minister Justin Trudeau, it found itself offering huge subsidies to automakers just to keep jobs on this side of the border. There was a real fear that generous subsidies included in Joe Biden’s Inflation Reduction Act would create a giant sucking sound, pulling Canadian jobs to the United States.
Joe Biden, Justin Trudeau, and the Inflation Reduction Act are no longer relevant to industrial policy, but the giant sucking sound remains. It was reported Wednesday that Stellantis is making a huge investment in new production in the U.S. — and it’s coming at the expense of workers at the existing assembly plant in Brampton.
Stellantis is spending $13 billion over four years, it says, on facilities around the Rust Belt, with plants being retooled or reopened in Michigan, Illinois, Indiana, and Ohio. It’s a major political win for President Donald Trump, not least because it’s pretty clearly in response to Trump’s tariffs. Earlier this year, Stellantis reported a $3.7 billion loss, which included nearly $500 million in direct tariff charges, not including other policy changes backed by the Trump administration and a GOP-dominated Congress.
Prime Minister Mark Carney is correctly ascribing the Stellantis announcement to Trump’s tariffs, and the feds are making noises about challenging the generous subsidies they’ve been providing to the automaker. Industry minister Melanie Joly issued a letter to Stellantis, questioning the future of the automaker’s subsidies she says were predicated on the company maintaining both its Brampton and Windsor plants.
Premier Doug Ford is similarly demanding commitments from Stellantis, but is stopping short of anything like consistently applying the Diageo Precedent, since the automaker will continue to employ people in Windsor notwithstanding this week’s announcements.
One possibility going forward is that Stellantis finds a way to keep some face-saving level of work at the Brampton plant, the federal and provincial governments declare a kind of victory and move on, and Stellantis keeps its production subsidies. But there’s a more alarming possibility that Canadian policymakers should be ready for: that for Stellantis and other automakers, the costs of Trump’s tariffs simply aren’t worth a substantial footprint in Canada going forward — at least, not at anything like the level of integration we’ve grown accustomed to for the last half-century.
Stellantis is bad news, undoubtedly. But the real nightmare for political leaders, not to mention the hundreds of thousands of autoworkers throughout the value chain north of the border, is: what if Stellantis is just the beginning?
The utter paucity of Canada’s leverage at the moment is striking. The tariffs levied against Canada create enormous, costly burdens for automakers here. They have been ruled illegal in U.S. courts; it hasn’t mattered. The current Supreme Court has been solicitous of Trump’s aims and might back him in the final accounting. If the court doesn’t, the Republicans are gerrymandering several states to try and retain their hold on the House of Representatives, notwithstanding what voters do in next year’s election. A GOP-held Congress could simply impose Trump’s tariffs in a more constitutionally sound manner, and there’s no reason to think that they’d pay a meaningful political price for it.
We can’t subsidize our way out of this problem. Tariffs won’t solve it either. But the status quo policy of Canada and Ontario involves both: subsidies to U.S. automakers to build electric vehicles, even as we retreat hastily from any policies that would encourage these companies to sell those vehicles to Canadians. Meanwhile, Chinese EVs (the most formidable competition the auto sector has faced since the rise of Japanese brands like Toyota and Honda) are kept out of North America behind sky-high tariffs.
So, in short: Canadian-resident auto companies are being handed billions of dollars to make cars we aren’t asking them to actually sell here (and perhaps, they’ll get to keep the money without even making them after all). Meanwhile, the companies that would dearly like to sell us the best EVs in the world are essentially forbidden by law, in an attempt to protect Canadian jobs — which is no guarantee, since all of these companies are looking at relentless losses in their balance sheets so long as the American conservative movement’s embrace of industrial autarky continues. They’re never going to choose Canada in a world of America First.
I sure hope somebody in the halls of Queen’s Park or Parliament Hill has a Plan B, because the status quo isn’t working, and isn’t going to last.
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