Canadian bridge blockade could worsen Biden’s economic headaches

An anti-vaccine protest could pose a new risk to supply chains and inflation the longer it continues to shut off a critical trade route between the U.S. and Canada.

The anti-vaccine protest blocking a critical trade route between the U.S. and Canada threatens to exacerbate two persistent economic challenges confronting the Biden administration: congested supply chains and rising consumer prices.

A convoy of truckers opposing cross-border vaccine requirements has stopped traffic from crossing the Ambassador Bridge between Windsor, Ont. and Detroit, the busiest international crossing in North America that facilitates the exchange of more than $300 million worth of goods per day.

The sudden halt has created a fresh headache for critical American industries that depend on the bridge to transport truckloads of products and parts every day. Factories on both sides of the border are already feeling the strain and pressure is rising on the Canadian and U.S. governments to get traffic flowing again.

“It's always been a high-risk choke point,” said Bruce Heyman, who served as the U.S. ambassador to Canada from 2014 to 2017. “It is a critical, strategic highway of manufacturing between our two countries.”

A White House official said the Biden administration is coordinating with Canadian officials to establish alternate traffic routes, while pressing the Canadian government to resolve the dispute through federal powers. The person also said administration officials are in touch with U.S. auto companies, agricultural groups and other affected industries.

But privately, other White House and USDA officials acknowledged the blockade will trigger a new wave of food shortages for some products and price spikes if it isn’t quickly resolved. U.S. supply chains for dairy and pork are highly integrated within Canadian markets. And a team on the White House National Security Council is heading up the U.S. response.

Many industries were already grappling with supply chain challenges triggered by the coronavirus pandemic, including an unprecedented backlog at American ports that have made certain products harder to find. Those logistical hurdles are contributing to a surge in consumer prices, which jumped 7.5 percent in January compared with a year earlier, the Labor Department said Thursday.

“It's really bad news for families,” said Christopher Sands, director of the Wilson Center’s Canada Institute. “And when you add to that the fact that this Midwestern area is full of blue-collar workers, Joe Biden's natural constituency, but some of them voted for Trump before, this is the worst headache coming up at the worst possible time.”

Lawmakers say they’re increasingly worried about the ripple effect the blockade will have on agricultural markets and food shipments that normally flow across the border.

“It’s disruptive to the regional economy and beyond,” said Sen. Dick Durbin (D-Ill.), who sits on the Senate Agriculture Committee.

Sen. John Boozman of Arkansas, the top Republican on the committee, said, “If it continues to go on, it will have an impact on various products.” Boozman added he was concerned the blockade could “exacerbate already increased prices” for food and other goods.

A senior official at the Department of Agriculture said, so far, their teams monitoring the situation haven’t seen any disruptions to food shipments. But on Thursday, Michigan’s Governor Gretchen Whitmer said the state’s agribusinesses were starting to feel the strain.

Dairy exporters already have been pushing for expanded access to the Canadian market under the U.S.-Mexico-Canada Agreement.

“It’s essential that product can move smoothly across borders, including our northern one,” said Shawna Morris, senior vice president of trade policy at the National Milk Producers Federation.

The bridge closure puts the most stress on the country’s Big Three automakers, which have already seen manufacturing stymied over the last year by a global shortage of semiconductors. The sector is also a key driver of inflation, with the price tag on new vehicles climbing 12.2 percent in January compared to a year ago.

The automotive supply chain between the U.S. and Canada has been built up over decades and is among the most highly integrated in the world, with some auto parts passing between the countries multiple times during the manufacturing process. Those goods cannot simply be diverted to other border crossings, Heyman said.

“The infrastructure and the ability to process the kind of quantity that we're talking about is quite limited,” he said. “It isn't so easily replicable that you can just drive to another place or go around.”

The bridge blockage has given some lawmakers more ammunition in their fight to bring manufacturing jobs back to the United States. They say critical operations should not only be moved out of China, where they have relocated in recent decades, but even away from countries more friendly to the United States.

“Michiganders have been saying for decades that when our manufacturing is outsourced too much, we end up paying the price,” tweeted Michigan Democratic Rep. Elissa Slotkin. “It doesn’t matter if it’s an adversary or an ally — we can’t be this reliant on parts coming from foreign countries.”

Politicians from both parties have decried the country’s dependence on foreign factories for critical goods, an issue that has come into sharp focus since the onset of the coronavirus pandemic.

The Biden administration has moved to bolster domestic manufacturing of certain products, such as semiconductors, batteries and medical supplies, while also tightening the federal government’s procurement rules with the goal of spending more taxpayer money on American-made goods.

“This action that is taking place at the bridge may actually propel more domestic manufacturing and decision making over the next few years,” Heyman said. “This may actually do more harm to Canada and its economy long term than anything else that's out there.”

The U.S. conducted more trade with Canada than any other country in 2021, Census data show. Sands at the Canada Institute said a large chunk of the Canadian economy, especially the part tied to the auto sector, revolves around producing parts that are essential to the final products American companies sell.

“The Canadians are not really trading partners anymore,” Sands said. “They're coworkers.”

That’s part of the reason Marta Leardi-Anderson, executive director at the University of Windsor’s Cross-Border Institute, sees attempts to decouple the U.S. and Canada economies as a risky proposition. The supply chains that exist support hundreds of thousands of jobs on both sides of the border and have allowed each to be more economically prosperous, she said.

“When you have a winning hand, let's stick with it,” Leardi-Anderson said. “Let's stick with what has been proven to work very, very well most of the time. There's always going to be exceptions to the rule, and right now we're facing one of those challenges.”