Lack of Trade Lawyers Poses Challenge for Companies Navigating Auto Tariff War: Robert Kreklewetz
Canada is in the midst of a growing trade storm with the United States, marked by escalating tariffs on automotive products. This conflict has far-reaching implications for the Canadian automotive industry, its legal landscape, and businesses struggling to navigate these uncertain times.
The Current Tariff Conflict
On April 9, 2025, Canada responded to U.S. tariffs with countermeasures of its own. The government imposed a 25% levy on non-Canada-U.S.-Mexico Agreement (CUSMA) compliant vehicles from the U.S. It also targeted non-Canadian and non-Mexican content in CUSMA-compliant vehicles. These moves were a direct retaliation against earlier U.S. tariffs, which included a 25% duty on Canadian automobiles, steel, and aluminum products.
Canada’s tariffs aim to shield its auto sector and push the U.S. to remove its own tariffs. The government is also developing a remission framework to encourage domestic production and investment. However, these measures are expected to increase costs for automakers, disrupt supply chains, and ultimately raise car prices for Canadian consumers.
The Legal Implications: A Shortage of Trade Lawyers
The trade conflict has created a surge in demand for international trade lawyers in Canada. Yet, the country faces a critical shortage of experts with the specialized knowledge needed to navigate the complexities of the automotive sector. According to Robert Kreklewetz of Millar Kreklewetz LLP, effective trade lawyers in this field must have extensive experience, high-level client exposure, and a deep understanding of the automotive industry’s supply chain and regulatory environment.
Many legal professionals lack this specialized expertise, creating a significant gap in the market. This shortage has left companies scrambling for legal advice to mitigate tariff exposure, adapt their business models, and comply with shifting regulations. The challenges range from basic tariff questions to existential concerns about business survival.
Both Canadian and U.S. companies are seeking guidance as they face pressure to adjust their supply chains and manufacturing operations. The demand for skilled trade lawyers has never been higher, but the supply is failing to keep up.
Broader Economic and Industry Impacts
The Canadian automotive industry, which employs over 500,000 people, is particularly vulnerable to the ongoing trade war. Many plants have already experienced temporary shutdowns due to supply chain disruptions. There are fears that prolonged tariffs could lead to permanent closures. The industry’s reliance on cross-border trade has been severely disrupted, forcing companies to reassess their investment and operational strategies.
Canada also risks losing its competitive position in the North American market. U.S. policies incentivizing reshoring production could deter investment in Canada and weaken its automotive manufacturing capacity over the long term.
Uncertainty Ahead
Despite the high stakes, the resolution of the trade dispute remains uncertain. Canada has turned to the World Trade Organization (WTO) for dispute resolution, but experts like William Pellerin caution that the WTO’s appellate body limitations reduce its effectiveness in addressing U.S. trade actions. This geopolitical standoff continues to create anxiety across industries.
The trade war highlights a broader shift in North American economic relations, as the U.S. pursues protectionist measures in trade deals. For Canada, the immediate focus is on mitigating the fallout of tariffs while striving to maintain industrial competitiveness and economic stability.
Impact on Automotive Manufacturing
The Canadian automotive manufacturing sector is facing unprecedented challenges as the trade war intensifies. The industry, which is a cornerstone of the economy, employs over 500,000 individuals and contributes significantly to the nation’s GDP. However, the imposition of tariffs has led to a sharp decline in production levels, with many manufacturers reporting a 20% reduction in output since the start of the conflict.
Automotive plants across Ontario and Quebec have been particularly affected, with several major facilities implementing temporary shutdowns. These disruptions are not only affecting production but also leading to a rise in unemployment rates in these regions. Experts predict that if the tariffs remain in place, the industry could face long-term damage, with some plants potentially closing permanently.
Supply Chain Disruptions and Consumer Prices
The automotive supply chain, which is heavily reliant on cross-border trade, has been severely impacted by the tariffs. Components such as engines, transmissions, and electronic systems, which are often sourced from the U.S., are now subject to the 25% levy. This has led to a significant increase in production costs for Canadian automakers.
These increased costs are being passed on to consumers, resulting in higher vehicle prices. Industry analysts estimate that the average price of a new vehicle in Canada has risen by 10-15% since the tariffs were implemented. This price increase is expected to further depress sales, creating a vicious cycle that could have long-term consequences for the industry.
The Role of Government
In an effort to mitigate the impact of the tariffs, the Canadian government has introduced a series of measures aimed at supporting the automotive sector. These include financial incentives for domestic production and investment in research and development. The government has also established a remission framework, which provides relief to certain manufacturers affected by the tariffs.
However, these measures have been met with mixed reactions from industry stakeholders. While some have welcomed the financial support, others argue that the initiatives do not go far enough in addressing the root causes of the problem. There are also concerns that the government’s approach may inadvertently create market distortions, potentially harming competition in the long run.
Broader Economic Implications
The ongoing trade war is having far-reaching economic implications that extend beyond the automotive sector. The tariffs have led to a decline in investor confidence, with many foreign companies reconsidering their investments in Canada. This has resulted in a slowdown in economic growth, with GDP forecasts for 2025 being revised downward by several percentage points.
The trade conflict has also strained diplomatic relations between Canada and the U.S., raising concerns about the future of bilateral trade agreements. The situation has prompted calls for a more diversified trade strategy, with many advocating for increased trade with other regions such as Asia and Europe. However, diversifying trade partners is a long-term solution that may not provide immediate relief to the struggling automotive industry.
