In June, the Trump administration placed tariffs on steel and aluminum imports from Canada, Mexico and the European Union. Canada responded by placing tariff on $12.5 billion worth of U.S. food products.
A senior administration official told CNBC in August that the White House would not rule out placing tariffs on vehicles made in Canada, a lingering threat to car part manufacturer Magna.
Magna’s second-quarter earnings report didn’t shy away from the tariffs’ effects: while the manufacturer posted “record sales [and] record earnings,” according to CEO Don Walker, it lowered its full-year forecast for North America on account of the tariffs.
“If the tariffs stay the way they are – and who knows if anything more gets ratcheted up in China – it’s about a $60 million a year hit,” said Walker, who spoke to CNBC’s Jim Cramer on Thursday.
But with a market capitalization of $18.7 billion and $41 billion in revenue, Magna might be able to absorb the annual $60 million for the time being, Walker told the “Mad Money” host.
“We would hopefully be able to talk to our customers, and [the cost] has to be passed through to the consumer at some point in time,” Walker said. “But I also think, at some point in time, NAFTA does get re-negotiated and the tariffs within NAFTA go away because … it’s bad for all three countries.”
NAFTA talks have been reportedly fraught, but ongoing between the three key players in the Clinton-era deal: the United States, Canada and Mexico. President Donald Trump has said he would like to wait until after the midterm elections to sign a new pact.
But even with the tensions, Walker, whose company recently entered joint ventures with Lyft and Beijing Automotive Group, said he sees brighter times ahead for the mass-market auto giant.
“I think the industry is the highest-tech industry in the world,” he said, nodding to the race to create reliable self-driving cars and the growth in electric vehicles. “We have lots of technology, we’re spending a lot in R&D, so I think there’s huge opportunities globally in the automotive industry.”
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