Economists warn of ‘severe’ economic damage as protesters close more bridges to the US

An extended shutdown of the Ambassador Bridge, Canada’s main trading route with the United States, will have “severe” economic consequences for major industries across Ontario if it’s allowed to persist, economists are warning.

Five days since protesters stopped traffic at the storied suspension bridge spanning the Detroit River, multiple major industries across Ontario have reported slowed production, temporary layoffs and rampant delays that threaten to exacerbate product shortages and worsen already-high inflation.

Those delays may be compounded by newly-formed protests in Sarnia, Ont. — where trucks trying to cross the Ambassador Bridge were rerouted — and reports that another convoy of protesters is headed to the Peace Bridge that connects Fort Erie, Ont., with Buffalo, NY

Two of Canada’s largest banks, CIBC and BMO, warned on Thursday that continued blockades at key trade routes could hurt economic growth.

“For every week the protests continue, it could start to cut first quarter growth by up to a couple tenths of a per cent,” said Douglas Porter, chief economist and managing director at BMO Financial Group.

That impact is comparable to the economic damage of the floods in BC last November, which temporarily slowed interprovincial commerce in Western Canada and halted exports through the Port of Vancouver, said Porter.

A short disruption at the Ambassador Bridge will have little overall impact on the economy, said CIBC chief economist Avery Shenfeld, but if it lasts longer “than another couple of days, it would be much more difficult to avoid an economic hit.”

Several major industries rely on the Ambassador Bridge to ship and receive equipment, food, and technology, amounting to roughly $400 million worth of goods traveling the overpass every day.

Approximately one quarter of that trade goes to the auto sector, which accounts for about 124,000 direct jobs in Ontario and 291,000 jobs in Michigan.

The industry relies on a highly-interconnected, just-in-time delivery model that sees auto parts travel across the border within 72 hours of being turned into vehicles, said Shane Wark, a senior leader at Unifor overseeing the manufacturing industry.

Since protesters began occupying the Ambassador Bridge, virtually every major company in the sector has reduced production or stopped work entirely.

On Tuesday and Wednesday, multinational auto-manufacturer Stellantis sent home 5,000 workers from its Windsor assembly plant citing “parts shortages.”

Toyota Motor Corp. halted production for the rest of the week at its three Ontario plants, cutting worker hours in half.

General Motors Company curbed production at its assembly plants in Ontario and Michigan, while Honda Motor Company temporarily suspended work at its auto plant in Alliston, Ont., and warned that “further production delays are certainly possible.”

“Every one of the plants receives some components from the US, which means that all the plants will be affected by this sooner or later. That’s just the nature of the highly-integrated auto sector,” said Wark.

With longer shutdowns, Wark says the sector will face more layoffs and reduced hours for workers.

The blockades have also hurt food distributors in Ontario, which rely heavily on imported produce from the United States’ warmer regions while Canada’s farmland is frozen over during the winter.

According to the Canadian Produce Marketing Association, roughly 40 per cent of all produce shipped to the Ontario Food Terminal — Canada’s largest wholesale fruit and distribution center — travels across the Ambassador Bridge.

The goods can be rerouted through Sarnia — where trucks waiting to enter Canada are idling for up to 4.5 hours — but likely at the expense of produce with a shorter shelf-life, said Ron Lemaire, president of the Canadian Produce Marketing Association.

“Now we’re starting to see product that’s no longer of a quality to sell in the market, and product that has to be disposed of,” said Lemaire.

“All of those businesses coming out of COVID-19 restrictions, like restaurants and food places, they will have more challenges finding the products they need and at the price they need.”

The Bank of Canada reiterated concerns about the blockades on Wednesday, warning that the Canadian economy is already facing headwinds from pre-existing supply chain problems.

“If there were to be prolonged blockages at key entry points into Canada, that could start to have a measurable impact on economic activity in Canada,” said Bank of Canada governor Tiff Macklem at a press conference.

“Most truckers are trying to get goods in and out of Canada.”

The blockades have drawn the attention of top US officials, including Michigan Governor Gretchen Whitmer, who have called on Canadian authorities to put an end to the protests clogging economic arteries.

The scale of the US economy suggests that it likely will not face the same setbacks that Canadian industries are facing due to the shutdowns, said Porter. But if the protests do not subside, or if they inspire American protesters to take up similar demonstrations at key US trade routes, then American officials may have more of an incentive to intervene.

For interconnected sectors such as auto manufacturing, economic strain on both sides of the border is hard to avoid.

“There’s an old saying, that some auto parts go back and forth across the Ambassador Bridge seven or eight times,” said Porter.

“That’s how interlinked the industries are. If you get a disruption on one side, it will affect plants on both sides eventually.”