Podcast Episode: 0245 |
Can the automotive industry survive a brewing storm of tariffs and trade disputes? Join us as we explore the electrifying tension surrounding America’s proposed 25% tariffs on non-American vehicles and parts. The North American auto market is at a crossroads, and the consequences are being felt far |
Welcome back to the AutoLooks Podcast. I'm your host, as always, the doctor to the automotive industry, Mr. Everett Jay, coming to you from our host website at AutoLooks.net. If you haven't been there, stop by. Check it out. Read some of the reviews, check out some of the ratings. Go to the Corporate Links website page. Big or small, we have them all Car companies from around the globe, and if they're not there, trust me, they're going to be coming soon. We actually have a new list of car companies that are going to be added, all from the AutoLooks.net website. The AutoLooks podcast is brought to you by Ecomm Entertainment Group and distributed by PodBean.com. If you'd like to get in touch with us, send us an email over at email at AutoLooks.net.
I'm going to take you back, give you a little history about the many we're going to be talking about. We're going to be talking about Canada, Mexico, China, the European Union, Australia, Philippines, Vietnam all the major players within the automotive industry now and how this trade war can work out against the American economy. Because they don't realize how intertwined they are with so many other countries, especially Canada and Mexico, ever since the creation of NAFTA in the 1980s. They don't understand how much they rely on the rest of us to keep them chugging along. Plus, they don't understand why some of these products are made within the confines of our home countries compared to theirs. Well, a little history lesson about Canada.
His son, Sam, found out about the American automobile industry and thought that their father should get into it, and he was very reluctant on doing it. Eventually he gave in and let them build cars. They started buying parts from Buick to build what they called the McLaughlin Buick, as it was later called in our country. Now, McLaughlin took the products and re-engineered them. Consider the fact that McLaughlin was ahead of its time and was literally a high-end product. When you bought one, you bought it for life. It was like buying a Rolls-Royce. Their precision, the machining and tooling of their products was above everyone else, and that's what they did with their parts that they got. Now, as they transitioned into the automobiles, they essentially found new buyers. The American industry was essentially blocked off from everyone else.
Back in the early days, a lot of countries had independence and they didn't want other countries selling their products within it. Most countries ran independently. Now, Canada being a small population nation at that point in time, in the late 1800s and early 1900s, with a population of under 10 million people, it couldn't support itself, so it needed help from selling into the Commonwealth nations. Being part of the British Commonwealth made it easier for us. It gave us a bigger market and opened us up. So, we were able to build products within our nation and send them out. Because we were a growing nation, we were able to do it cheaper and more efficiently than places like Great Britain. Well, they use that to their advantage. And the Americans eventually use that to their advantage, setting up manufacturing facilities in Canada Studebaker being one of the first ones ever to set up a manufacturing site in Canada in Hamilton, Ontario all set about building vehicles within our country, just so they could ship them and sell them to the British Commonwealth.
Because if you're able to sell into the British Commonwealth, it made it easier to sell into other European marketplaces. So, they didn't even have to go that far. Literally across the river from Detroit you could build a plant in Windsor, Ontario, which Ford did. Literally crossed the river, built his products, just so he could ship them across the ocean because there was a free trade agreement to Commonwealth nations. We can do it cheaper here, because all the minerals and all the materials that went into building their automobiles, even in the UK, had to be brought in when in in Canada we had mines. My home city supplies tons of those minerals to build the automobiles.
Now, because we build so many cars, our parts industry has become one of the biggest in the world population base in the province of Ontario. One out of every eight (8) jobs in the province of Ontario are tied to the auto industry. One out of every eight (8) jobs Even in my home city. Mining is a big player here, but there are still ties to the automotive industry. Now the trade war is not going to affect my home city, being the second least effective city in the entire country. Now, a city like Windsor, who relies on the other side of the river in Detroit, is highly affected by this trade war. So, with that little bit of history, you kind of understand why our auto industry exists.
Ford builds the Maverick in Mexico, and they do that for a reason. They do that because to build it in the United States the cost would go up. It would be closer in line to what the Ford Ranger cost you. So, they shipped it across the border into Mexico, where labor is cheaper. They could do it cheaper, which means they keep the cost down on their product.
Now a lot of Chinese companies realize that Mexico is a massive automotive manufacturing site, all because of their dealings with selling into the United States and building cheaper entry level products for the American marketplace. So, their automotive market exists to service the American marketplace. Well, the Chinese know this and they're now utilizing vacant plants that the American companies have left to come and set up shop, because it's easier for them to enter the South American marketplace. They would love to use it as a jumping ground to go into America or even Canada, but unfortunately, they can't. They don't want to set up shop in the United States to sell vehicles there, because even in their home country, in China, labor is much cheaper than it is in the United States, so their vehicles would cost even more being built stateside. Now, going into an all-out trade war with all these countries, the Americans don't realize what they're about to do. They're about to drive up the costs of automobiles. Now, if you don't remember, last year we did a podcast about entry-level electric vehicles, and why it's taken so long to get into that industry is because we need to decrease the costs associated with the battery packs to be able to bring down the size and sell ability of entry-level products.
If you look at the North American marketplace, 25 years ago you could pick up a vehicle for under $10,000. Under $10,000, brand new Hell. More than a decade ago you were able to do that. I knew somebody that did that. They bought a Chevrolet Sonic, went in and they got it for $9,990. Didn't get any warranties, didn't get any bells and whistles nothing Under $10,000. Well, all of those cars have disappeared from the North American marketplace After Trump's last term.
But why? Because the entry-level market isn't there. Now that we have to pay even more to have stuff built in Mexico, to be within the confines of our free trade agreement, the entry level products have been nearly wiped out. Bringing them over from Korea, as Kia does, is one of the only options out there, but now, with a 25% tariff coming into play, kiss those entry level Kia's goodbyes. Because if Kia wants to keep selling the Rio or even the new K4 in North America for the low price that it offers it at, it's going to have to move production to the United States, which is going to cost them billions.
All for what? Four years? Because, who's to say, in four years, the next president that comes in gets rid of all of these and signs a new free trade agreement to open up the markets for all of us to work together. But by that time the damage will be done. Why? Because countries like Canada, Mexico, are already looking at other partners for free trade agreements. Canada is already looking into becoming part of the European Union. We know we can't become part of it because we're on the other side of the pond, but we're trying to broker a deal for free trade agreements similar to the Commonwealth agreement that we once had with the UK. We're trying to get into the United Kingdom Because hell, there's nearly 70 million people right there.
Chrysler is pretty much non-existent, same with Dodge in the European marketplace. They have nothing people really want. Ram and Jeep are one of the only ones that have a presence there Now. Jeep can stay on because a few products are built on the other side of the pond, but, being known as an American car company, less and less people are going to be buying them. Why? Because European countries are going to now subject these products to massive tariffs as well. They're going to retaliate. You have to remember a country like Germany can literally just cut off the Americans from their country and not have to worry A country like Canada with just over 40 million people, a little bit more different. We need to develop free trade agreements with other countries to stave off what we lost with the Americans.
Funny thing is there's two steel mills in the province of Ontario. One is Dofasco, the other one is Algoma. Dofasco sells a lot of their steel to the automotive industry within the Southern Ontario area, but then the 401 belt between Windsor and Toronto and the QEW belt going from Toronto all the way to the Niagara Peninsula. They sell a lot of their steel into those markets and that's what they're still doing because production hasn't stopped or slowed yet. Algoma Steel, being a company from Northern Ontario, knowing that they have to fight and live on a global market, is already cutting off all their ties with American sales. They're now going after military contracts in Canada. Now that we're building brand new warships and fighter jets, they're going after those contracts to take out the American ones that are part of it. They're now going after the pipe industry in Western Canada. Hell, the mayor of my home city is now fighting to get the Canadian government to help process our minerals within our city.
So, it's not just raw material that leaves our city after it's been milled. No, you get all the precursor stuff to build your batteries coming from our city, because if we jump on that now, we have all of that now, countries that can't keep up on those marketplaces. You have to remember China still needs stuff. Their market is growing. Sure, they have an abundance of tons and tons of raw material, but not enough.
Brokering a deal with Australia, between the European Union, European Union can get all their mineral rights from Australia or Canada. Mexico is abundant with tons of minerals. South America is abundant with it. You have to remember, like I said at the beginning, with softwood lumber we have more of it. We have more industry already pre-set up to make it. So, when your nation can't support what it needs, it needs to buy it from somewhere else. This is what they don't get.
This trade war is making it so that when the United States needs more raw minerals and needs more material to build all of these automotive parts and new manufacturing plants that are getting set up, the nations that they once had a free trade agreement with them are just going to look at them and say no, do you really think if we broker a deal with the European Union? Or even China again has come back to us. We haven't gone to them. They've come back to us to try and broker a new free trade agreement between China and Canada. Hell, India has come back to the table and said look, we know there's a major diplomatic issue between our two countries, but let's put it off and start working on a trade agreement. You guys have stuff we need because we don't have it in our country and we know America is cutting you off. So, if you need somewhere else to sell it, we'll buy it, but someone like the mayor of greater Sudbury is saying whoa, whoa, whoa, whoa, whoa, whoa. Let's put the brakes on this. Okay, let's make it so.
The reason why the Hibernia oil field hasn't exploded with tons of development is because Newfoundland is still pushing for processing on their own province. They're tired of tons of oil coming out of the ground and the only jobs they get are for supplying and operating these oil rigs. It comes out of the ground, gets put on ships and shipped over. It still stays in Canada, but it still gets shipped over to New Brunswick to go to the refinery in St John, New Brunswick, or it gets put on the boats and goes all the way down to Texas, newfoundland's, saying no, we want the stuff that leaves our province to be the gasoline, the diesel, the synthetic fuels, everything else that you guys want to use our oil for. We don't want to just give you the raw minerals. We want you guys to at least get the raw materials. You want to make it into something? Fine, but we're going to turn it into that petroleum-based product that you guys want in our home province, because they've been fighting for that.
Hibernia hasn't taken off, but the Canadian government has been backing them. Now, with the trade war on, they are backing them. The auto industry is a big player in this. Like I said, one out of every eight jobs in Ontario are tied to the auto industry. For the most populous province in Canada, nearly 13 million people. One out of every eight of those people is tied to the auto industry. That's a lot. So, brokering brand new deals between all these other countries, processing all of this stuff within the confines of our own nations, telling people we got what you need now, but if you want it, you're going to pay for it. All of these countries are now coming to the table.
By doing this to the auto industry, one of the world's biggest industries, you may be able to get more investment and more plants into your country, but at the end of the day, when you need all the products and all the materials to build all the products within those plants, you're going to have to set up a lot of mines. And when that's all mined out and all those materials are gone and your country can't support it anymore, where are you going to go If the United States wants to take a lesson from somebody? Look at countries that are heavily built up. Look at countries like Taiwan and Japan. I get it, Taiwan might be a state of China essentially, but take a look at the island of Taiwan and the country of Japan. Do they have lithium mines, cobalt, nickel, platinum, palladium, gold, copper? Japan's got a lot, Taiwan doesn't. And yet Taiwan is one of the top superconductor producers of the entire world. Where do you think they get all those materials from other countries? So, do you think if they pissed off let's say, China or Japan or Australia, one of their biggest trading partners for the products they need do you think those industries could support themselves? You can fight to get everything in your backyard, but when everything's in your backyard, you still need to support what's there, and if you don't have the products to support it and the agreements in place with these other countries, you can't maintain it.
You know, when NAFTA was signed, the auto industry in Canada nearly collapsed Because when it happened, the Americans didn't need to build vehicles in Canada to ship them to Commonwealth nations or the European Union. They could build them with the confines of their own industry and Canada just became a subsidiary division. How did we become what we are now? We gave mass incentives and we built up our parts industry. By having so many parts built so close together and having some of the largest automobile parts manufacturers in the world right at my doorstep, we built the auto industry back. It's not as big as it once was, but it's still here.
By creating a trade war, you may be able to destroy most of it, but you have to remember there's a lot of countries that have had trade wars before, and when those plants shut down, countries buy them. Car companies can spawn from closed factories. Ever heard of Moskvich? Yeah, they disappeared. Well, Moskvich is back in Russia. After Renault closed their plant in St Petersburg, it was bought out with investments from China and products designed and engineered in China. Moscovich is now back to producing vehicles for the Russian marketplace. Their government took over the plant and is now producing more vehicles.
So, if the war ends tomorrow, all of those companies that pull out of that marketplace are going to have to start from scratch again. Do you think they could buy back those plants? No, because the government has taken them over for their own homegrown product and now that they built their own homegrown industry. It'll be even harder for other people to get into it. With one out of every eight jobs in Ontario being supported by the automobile industry. Do you really think if you manage to get GM, ford and Chrysler to shut down their plants here, it's going to kill the auto industry? It's going to slow it down, but we're going to find new trading partners to deal with and those plants.
Brazil is doing it too. They're welcoming the Chinese as well since BYD has taken over the previous factory that built Troller. When Ford decided to shutter Troller, it put a ton of people out of work and completely shut down an amazing car company. If you haven't heard about Troller, go listen to our podcast Trolling for Jeep. It's about the Troller Automobile Company and how it really should have been kept alive. Well, Brazil took over the factory and is now being transformed into a new manufacturing site for Chinese automobiles.
Asian marketplaces do this too. The only marketplace that has literally lost its auto industry and never regained it or tried to create its own was Australia. But where Australia lost its auto industry? Due to the fact of its high wages. Trust me, you can't afford to manufacture automobiles in Australia because of the wages you have to pay in that country. But where they lost those manufacturing plants, they gained on mineral exploration. They have tons of massive mines that took over all those people which are higher paying jobs, and those marketplaces want those products. So yeah, a trade war may seem like a good idea, but, like I said, when you shut the door on all your friends, push them all out and start telling them that they owe you all that money you loaned them over the years. When you go to open your door, at the end of the day there's going to be nobody standing there, and that is what is happening with this trade war.
You can be proud of where you come from. I'm proud of where I come from, but you have to remember we all live on this world together. Unless we all learn to work together, we're not going to get out of this and hell, we're not going to get out of this in a good position. So, at the end of the day, this brand-new tariff war that's being set about by the Trump administration is going to become one of the most harmful points in American history for its automobile industry. It's literally going to bring us to its knees.
The number of parts that cross the border between both Mexico and Canada into the United States and then products coming over from China and the European Union into the United States to manufacture vehicles. It's going to be hit massively. It takes years to set up all these brand-new plants and a lot of these companies are just going to pull from the market and hope that the next president won't do what he's doing. You just have to remember everybody. As long as you have other markets that you're in and you can hold out, you can basically just pull from the market and do a hold and wait.
So, tell us what you think about this tariff war. Do you really think that we're onto something here, or do you really think I'm just a crazy quack, because I've heard so many things about tesla and all that being kicked out of like auto shows in Canada and reading stuff online about people going all those Canadians. They don't know what the fuck they're talking about. They're just a tiny little nation. We're going to take them over. Yeah, have you ever watched anything about the hardest countries in the entire world to take over Canada’s number three? Okay, and we're number three because of our size, just remember, remember that.
So, tell us what you think about this tariff. How do you think it's going to play out? Send us your comments, write us at the bottom. Click the little like button at the bottom of this podcast. Like, share, comment about it. Send it to your friends, send it to your family and ask them what they think about this tariff, what they think the outcome is going to be. Do you really think the automobile industry in the United States is going to get even bigger and grow America, or do you think it's really going to be put out to pasture and kicked out of the global party? Tell us what you think in the comments below and after that, stop by the website, read some of the reviews, check out some of the ratings. Go to the Corporate Links website page, big or small. We have them all from the AutoLooks.net website.
The AutoLooks podcast is brought to you by Ecomm Entertainment Group and distributed by PodBean.com. If you'd like to get in touch with us, send us an email over at email @ AutoLooks.net. So, like I said in the beginning, this tariff war may turn out to be either a good grace or a bad grace, but in the end, there's going to be a lot less friends sitting in the sandbox with them. Hell, the US might just be playing all by themselves and, trust me, when you work on a global scale, you don't want to be working all by yourself. You need friends. So, from myself, Everett Jay, the AutoLooks podcast and the Ecomm Entertainment Group, strap yourself in for this one fun wild ride that this automotive tariff war is going to take us on. Thank you.
Everett J.
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