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In May, Trump called for a Department of Commerce investigation to determine the national security effects of the import of automobiles and automotive parts under Section 232 of the Trade Expansion Act of 1962, the same legislative move to impose steel and aluminum tariffs.

Washington placed tariffs of 25 per cent on steel and 10 per cent on aluminum on June 1, which Ottawa matched with its own list of tariffs one month later.

Canada produced 1.9 million vehicles in 2017, roughly equal to the number of vehicles sold in the country.

Photo by Ty Wright/Bloomberg

Still, Mendes said Canadian manufacturers would be unlikely to satisfy demand domestically if auto tariffs come into effect, due to the limited range of models that are manufactured in Canada.

“Unless you believe someone looking to buy a flashy drop-top convertible sports car would be satisfied leaving their local car dealership with the keys to a minivan, it isn’t a feasible solution to the potential problem at hand,” the CIBC report said.

In his report Wednesday, Mendes warned that some level of government support would be required in its base-case scenario, in which tariffs are threatened but delayed.

He also said Bank of Canada should take a “cautious approach” to future rate hikes.

A report last month by Moody’s Investor Services said noted everyone in the supply chain would feel the pinch from U.S. tariffs, including automakers, parts suppliers, dealers and retailers.

U.S. manufacturers have been among the companies calling on Washington for restraint. Moody’s said that GM would feel particularly acute pain amid tariffs, as 30 per cent of its U.S. sales unit requires imports from Canada or Mexico. Ford imports 20 per cent of sales from the two countries.

Auto parts makers would also be impacted. U.S.-made parts account for about 45 per cent of the vehicles assembled in Canada, Mendes said, suggesting any retrenchment from tariffs “would ripple across the border in the Great Lakes region.”

“There are quite literally carloads of reasons not to raise tariffs, but that might not mean much.”

• Email: jsnyder@nationalpost.com | Twitter: jesse_snyder