OTTAWA — The North American trade pact has shielded Ontario-based auto parts manufacturer Linamar from the worst of the U.S. tariffs so far, CEO Jim Jarrell told The Logic, but the list of steel and aluminum products facing duties is a growing problem.

“How do you even understand what you have to pay? It’s a challenge,” Jarrell said last Tuesday in Ottawa, where he and other manufacturing executives met with federal politicians and officials ahead of the Nov. 4 budget.

U.S. President Donald Trump granted a full exemption from his 25 per cent tariffs on major auto parts for anything that complied with the United States-Mexico-Canada Agreement (USMCA). That was a relief to Canadian manufacturers in the highly integrated sector, who feared parts would be hit multiple times as they moved back and forth across the border.

That carve-out does not apply to the 50 per cent tariffs on steel and aluminum, however. In August, the Trump administration quietly added 407 more steel and aluminum derivatives to its tariff list—including some automotive parts, such as those for exhaust systems. Last month, the U.S. Commerce Department announced it was considering expanding the list again.

Those tariffs do not apply when the U.S. is the country of “melt and pour” for steel or “smelt and cast” for aluminum—terms for where the metals originate. Trying to calculate that content downstream in the manufacturing process, is like “unscrambling the omelette,” Jarrell said.

“The integrated system between Mexico, Canada, and the U.S. is so prevalent.” 

The tariffs on steel and aluminum had been the focus of Canada’s most recent round of trade talks with the Trump administration, and Carney has shown he is aware of their importance to the auto industry. On Thursday, he suggested eliminating them could help the sector because those metals are in its supply chain. 

That was before Trump called a halt to the negotiations, voicing anger over an ad the Ontario government was running in the U.S. featuring an anti-tariff speech by former U.S. president Ronald Reagan. On Friday, Ontario Premier Doug Ford said he would pause the campaign Monday to give negotiations a chance to resume—but not before getting a chance to air it in the U.S. during the weekend World Series games.

Based in Guelph, Ont., Linamar has expanded over the decades to serve several industries affected by the tariffs, including agricultural equipment and industrial machines such as the Skyjack scissor lift. It does not, however, pay most levies directly, Jarrell noted. Instead, customers who import its products to the U.S. are the ones who have to shell out. So far, he said, they are sticking with Linamar. “If they felt really strongly about it, we’d probably be hearing a lot about it, like ‘you’ve got to move this, move that,’” he said. “We’re not hearing it to that point.”

Losing the USMCA exemption, however, would be devastating—a warning Linda Hasenfratz, executive chair of Linamar, sounded in an interview with The Logic this year. Jarrell frames it in simple terms: having to pay tariffs every time a part crosses the border, he said, “would bring the industry to a halt.”

That is why a successful review of the USMCA next year is such a priority, Jarrell said, even if it means Canada agreeing to a higher share of U.S. content in vehicles to qualify for preferential tariff treatment through the USMCA. “I think there’s flexibility there,” Jarrell said, while acknowledging it would not be easy. “Duty-free would be the best thing to do, and so we have to give up a little bit on that regional value—I think that would be appropriate.”

Speaking later at a roundtable discussion with other members of the Association of Equipment Manufacturers, Jarrell urged Ottawa to dramatically increase the budget of the new Strategic Response Fund, which replaced the Strategic Innovation Fund, to help sectors hit by tariffs. “The $5 billion may need to be $10 billion,” he said.

Earlier this month, Linamar announced a US$300-million deal to acquire select assets from the North American operations of Michigan-based Aludyne, including its proprietary light-metal casting technology. The agreement means Linamar is able to expand its manufacturing footprint in the U.S., although the company stressed the decision was not prompted by tariffs.

Rather, he said, the deal is part of a growth strategy aimed at acquiring “distressed assets with very good technology” that other parts of the company can use. Linamar can now bring this advanced aluminum casting technology from Aludyne to Canada. “We do a ton of machining and assembly in Canada, which we’re very productive at, so we can now probably buy from ourselves, with this new company, create more opportunities for Linamar inside Canada to deliver to our customers.”

That does not mean the acquisition has nothing to do with the shifting trade environment. In addition to the casting technology, Linamar is acquiring Aludyne’s plants in the U.S. In its statement announcing the deal, Linamar suggested having assets in multiple countries would help insulate it from “evolving geopolitical and regulatory frameworks.”

In the interview, Jarrell called the U.S. “a prime, good market,” but not the only one, as Linamar is also considering Aludyne’s remaining business in Europe and Asia. “If it was in Canada, we would have bought it in Canada.”