Trade Wars: Canadian automotive and parts industries threatened by U.S. Inflation Reduction Act

Ottawa, Ontario – A recent bout of investment into the American automotive and battery industry may result in fewer Canadian manufacturing jobs, according to industry representatives speaking in the House of Commons.

On Tuesday, Industry representatives raised concerns that investment from the U.S. Inflation Reduction Act (IRA) into American manufacturing may trigger investment flight from Canada to the United States, reducing the number of Canadian manufacturing jobs in automotive, steel and manufacturing sectors.

This may result in fewer collision repair tools and automotive parts being produced in Canada, lengthening shipping times and costs.

Contrary to the name, the IRA aims to promote clean energy and clean transportation in the American manufacturing industry via tax incentives, grants and loans guarantees. It has previously passed the U.S. House of Representatives in August this year.

According to Canadian Steel Producers Association president Catherine Cobden, the IRA emphasizes climate subsides and tax relief without the associated carbon taxes – something the Canadian government may mimic to stay competitive.

“We don’t expect a dollar-to-dollar response with the U.S., but we do believe that Canada must further incentivize our capacity to both adopt and operate climate solutions such as hydrogen, renewable fuels, cleaner grids,” said Cobden.

Scott MacKenzie, Toyota Canada’s director of corporate and external affairs, warned that the IRA would cripple Canada’s ability to attract investment for vehicle and battery assembly in Canada, saying ““while the IRA is being presented in many quarters as key legislation to fight climate change, in reality it is an act of trade protectionism.”

“Forcing the on-shoring of future powertrain production within the borders of the United States at the expense of all other countries, including Canada,” said MacKenzie.


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