You have to watch out for those Canadians, they’re a wily bunch.
A few weeks ago, as President Donald Trump prepared to impose tariffs on Canadian imports, the Canadian Embassy in Washington prepared a public relations counterattack. It simply gathered up publicly available data from U.S. government agencies about how many jobs in each congressional district in the country depend on exports to Canada and posted the information. The implication: You want to put tariffs on us? We can put tariffs on you, too, and here’s where it will hurt the most.
In Virginia, the two congressional districts with the most jobs in industries that export to Canada are west of the Blue Ridge: the 6th and the 9th (although these days the 9th does extend east of the Blue Ridge by a few counties).
Of those, the 6th — which runs from the Roanoke Valley up through the Shenandoah Valley and is represented by Republican Ben Cline — is the most connected to the Canadian economy. Those U.S. government stats that the Canadians made sure Americans saw show that Canadian exports are tied to 5,350 jobs in the 6th District, and $1 billion worth of exports each year.
The fact that the 6th District topped the list — with four times as many Canadian-connected jobs as some of Virginia’s other congressional districts — didn’t surprise me. Agriculture is one of the few trade sectors in the United States that traditionally runs a trade surplus, which always makes agriculture a prime target for any country that wants to put tariffs on us. The 6th is home to some of Virginia’s top farm counties. The Shenandoah Valley is poultry country, and the Alleghany Highlands has a robust forest products industry, both of which involve a lot of exports — so it made sense that the 6th would find itself on the front lines of a trade war.
What surprised me, though, is that those aren’t the top products from the 6th District being exported to Canada. Meat products (which would include chicken and turkey) rank third. Pulp and paperwood ranked fifth. Add those together, and they’re still not as big as the industry sector in the 6th District that exports the most to Canada: motor vehicles.
Overall, the auto industry accounted for the top Canadian-bound exports in four of Virginia’s congressional districts; the others are the 3rd in Hampton Roads, the 7th in the Piedmont and the 9th in Southwest Virginia. Auto-related exports ranked as the second-biggest Canadian-bound products in two districts: the 2nd in Hampton Roads and the 5th in Southside. In all, the auto industry ranked in the top five sectors tied to Canadian exports in nine of Virginia’s 11 congressional districts.
You can scroll through them all here:
Sources: Trade Partnership: Goods exports (2024 data, 2/2025 release), services exports (2023 data, 12/2024 release) and jobs, calculated figures, based on U.S. Census Bureau and U.S. Bureau of Economic Analysis data at state and national levels. Dun & Bradstreet:
Canadian-owned businesses (2/2025 release). Figures may not add up due to rounding.
That poses a question: How did the auto industry in Virginia become so tied to Canada?
There are multiple answers to this, some of which help us understand the complexity of the modern economy and some of which help us understand the past that got us here.
First, let’s look at why there’s an auto parts industry in Virginia at all. Shouldn’t that all be in Detroit, anyway? Once, it was, but that was then, and this is now. A study by the Michigan-based Upjohn Institute says that after World War II, 60% of the auto parts that Ford and General Motors used came from Michigan. Now, only about 25% do — and not all of the rest even come from the United States.
One reason the percentage fell, the report said, is that the big car companies got out of the business of making their own parts. It was cheaper for them to buy them elsewhere. That led to other companies getting into the auto parts business, and they weren’t necessarily in the industrial Midwest — just close enough to ship there economically. Furthermore, automaking itself moved, with auto companies opening plants in the South, where unions (and the laws surrounding them) weren’t as strong as they were in Michigan. That helped diffuse the auto parts industry further, because now more of the country was within easy shipping distance of an auto plant somewhere.
All that has helped grow an automotive-related sector in Virginia, with much of that in the western part of the state: Volvo in Pulaski County, Mack Trucks in Roanoke County, Yokohama in Salem, Goodyear in Danville and so forth. The Virginia Economic Development Partnership says that over the past decade, some 8,000 auto-related jobs have been created in Virginia.
That still doesn’t explain, though, why some of that automotive sector is tied to Canada — other than that Canada is our neighbor and our biggest customer for exports of any kind. The more specific reason for that goes back to a little-known but consequential trade deal signed 60 years ago at the LBJ Ranch in Texas.
At the time, there were separate American and Canadian automaking sectors — separate because the Canadian one existed behind a high wall of tariffs on American imports. To compete in the Canadian market, American automakers had to build factories north of the border. If Trump is reading this, he might think, “See! Tariffs work! High Canadian tariffs helped that country build an automotive industry!”
Except that’s not quite how things worked out. Those Canadian plants were inefficient — and therefore costly. The Canadian customer base was simply smaller, so production runs were smaller, and the plants there couldn’t achieve the same economy of scale that their American counterparts could. Because those Canadian plants were more expensive to operate, there was the danger that the big American automakers (and there really were no Canadian automakers) would shut them down and force Canadians to pay the cost of those import duties if they wanted to buy a car.
Here’s where we can scribble down an economics lesson: Protectionism doesn’t always protect jobs. The Canadian prime minister — a fellow named John Diefenbaker of the Progressive Conservative Party — was worried about two things. He worried that Canada’s auto industry would shrivel up and die. He was also worried about Canada’s growing trade deficit with the United States. He appointed an economist to study the matter. That economist came back with two warnings: If you keep these high tariffs, the Canadian auto industry will continue to be inefficient and expensive — and in danger. But if you have free trade, it will get wiped out completely. Instead, the solution lay with a third option: The United States and Canada should merge their auto industries. Instead of treating the two countries as two separate markets, treat them as one big one — almost as if Canada were a 51st state. OK, I added that phrase, but that’s essentially what the idea was. You can also call that idea globalization.
Either way, the result was the Canada-United States Automotive Products Agreement, or, simply, the Auto Pact. By then, Diefenbaker had been voted out up north; Lester Pearson of the Liberal Party was in, but his priorities were the same. In January 1965, Pearson flew to Texas to sign the deal with President Lyndon Johnson.
Auto companies generally loved the deal. Instead of having to produce an American version and a Canadian version of the same vehicle, in separate plants on different sides of the border, they could produce just a single version — and it didn’t matter where they did it. That helped companies achieve better economies of scale, which helped keep car prices lower than they would have been with separate plants. That helped consumers on both sides of the border. Meanwhile, Canada saw auto production increase for the models its factories were making — and American companies saw exports of auto parts increase. Supply chain companies grew up to service an industry that spans an international border, and until now, that hasn’t mattered.
The Auto Pact itself is no longer in force, but the economic system it created is very much in force. In economic terms, the auto sector of Canada, concentrated in Ontario and Quebec, is already our 51st state because the border doesn’t mean much in the auto industry. The London Free Press in London, Ontario, recently wrote about a scrapyard there whose metal crosses the border seven times before it winds up in a transmission. The largest auto parts manufacturer in North America is said to be the Ontario-based Magna International. Started in a rented garage in Toronto as a tool-and-die company in 1957, Magna’s growth mirrors the cross-border growth set in motion by the Auto Pact. It has plants all around the world, but on this continent, it has 59 in the United States, 50 in Canada and 33 in Mexico, because North American auto assembly is now spread out over all three countries.
Now, it’s certainly fair to argue that if those auto plants in Ontario were in Ohio instead, the auto part companies in Virginia would still be selling the same number of parts — they just wouldn’t be counted as exports.
The fact, though, is that the auto industry has now spent six decades evolving an ecosystem that involves both sides of the border (indeed, both sides of many borders, but for our purposes here, I’m just looking at the U.S.-Canadian connection). Trump wishes it weren’t so; he thinks American automakers ought to be making cars in the United States. However, this isn’t going to get unwound quickly — if at all. Companies might be able to shift some production from a plant north of the border to a plant south of the border, and that would make headlines. That’s how the ecosystem is designed to work, actually. To shift all production back to the United States would require building more car plants, and the investment involved in that runs far longer than a presidential term. Companies will need to figure out whether that increased investment is worth it versus the cost of waiting Trump out.
Here’s a very imperfect analogy: Major League Baseball has a merged U.S.-Canadian market, too, because it has a team in Toronto. It would be inefficient to have a separate league just for the Blue Jays. Canada can’t support an entire baseball league on the level we expect; on the other hand, Major League Baseball has found Toronto a far more profitable place to have a team than, say, oh, Oakland. If Trump demanded those Toronto-based baseball jobs come back to the United States, and the team had to move, how long would it take some city to build a new stadium to accept them? Major League Baseball might just stall because the time horizon of business often runs far longer than that of any president.
In any case, that’s why motor vehicles and motor vehicle parts rank as the top export to Canada in so many parts of Virginia — and why so many jobs west of the Blue Ridge now depend on good relations with a country most people never even think about.
* * *
So you might be wondering when and how the American trade surplus with Canada in the early 1960s turned into a trade deficit. The answer: 1985.
What changed? Oil and natural gas.
We Americans are thirsty people with our pickup trucks and SUVs. We burn a lot of oil. Over time, we’ve reduced our reliance on Middle Eastern oil and replaced that Mideast oil with Canadian oil.
Canada, not Saudi Arabia, is now our top oil supplier. One way for Americans to reduce their trade deficit with Canada isn’t tariffs, it’s simply buying less gas.
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