Thank you.
I'll give you just a quick piece about the APMA. We represent over 230 companies, 95% of independent parts production in Canada, 96,000 employees in Canada, 42,500 in the U.S., and 43,800 in Mexico. We're here to talk about the section 232 duties on steel and aluminum, but I'm going to put them together with the threat to the automotive and the automotive parts sectors.
The threat is based on the powers conferred by the Trade Expansion Act of 1962 through which Congress granted to the President the power to impose tariffs for national security reasons. The definitions are wide. I think it's important to remember that the power is repealable by Congress. Whether this Congress has the gumption to do so or not is a different matter altogether. Their implementation and usage are challengeable in international trade court, and certainly by commercial entities in U.S. district court, where we can seek injunctive relief. Many of us are considering that option if it comes to that.
Steel and aluminum are critical ingredients in the most valuable mechanical structural parts of a car. Stainless steel and other specialty steels used in automotive tooling are not available in Canada in the required quantities. That said, steel buys for volume Canadian parts are directed by OEMs, and Canadian-parts-production-directed buys essentially use Canadian steel and American steel. We are not a threat from a practical point of view to the American steel industry and steel interests.
Unconventional negotiating tactics are the main issue. I know that's stating the obvious, but this U.S. administration is conflating section 232 with NAFTA, and it doesn't appear to have any bias to U.S. automakers or U.S. parts suppliers. They're actually antithetical to the Detroit three. They're antithetical to the major American parts manufacturers. They are speaking directly to what they think is the automotive worker past, present, or future. Their doctrine appears to be disruption while they're stalling competition to the benefit of their current investment prospects. I was supposed to meet Larry Kudlow at the White House two weeks ago and then he had a heart attack the day before, so I met his staff. His staff said to me that we'll get through this, but it's all related. They don't hide the fact that they're conflating it; they tell that you to your face. Now, of course our response has to be Canadian-centric, but I think we can't be naive enough to think that they're going to put it on to paths because we say they should.
Canadian trade expansion continues, and, in our opinion, sometimes with no regard for details, thereby hurting the auto industry at a time when we're under the gun in NAFTA. Cars and parts are big and they don't travel cheaply. What works in PowerPoints and in talking points fails in life. We're having discussions now about a hurry-up offence for ratifying TPP and are having other discussions where the currency that the trade department is using is content levels in automotive. Those are the same content levels that the Americans are asking us to raise and on which they are pounding us with section 232. The section 232 tariff, a 25% tariff on cars and parts, would cause what we like to call a “carmageddon”. The industry operates on single-digit margins and it would grind to an immediate halt with a 25% increase in price. A $32,000 car—that's an average price here—would immediately be unsaleable at around $40,000.
The first customer is not the U.S. customer, not the final customer; it's the dealer, and dealers are not going to take delivery of inventory that is going to put them underwater. If dealers don't take delivery in the U.S. of cars made in Canada by U.S. automakers, those U.S. automakers are going to stall production. There's only a finite number of cars they can put on the front lot. When they do that, they're going to stop buying from Canadian auto parts suppliers, and Canadian auto parts suppliers are going to stop buying resins and stainless steel from American sources. There will be an immediate grinding to a halt, and an immediate impact on the market cap of public companies, and giant operational hits on private companies.
The economic stability of Ontario is at risk, but equally of Michigan, Ohio, Indiana, Pennsylvania, Kentucky, Alabama, and New York. That action by itself would send those regions into recession immediately.