During his election campaign, now-US President Donald Trump made it a part of his platform to consistently criticize the US auto industry. Many auto experts saw valid points with Trump bringing up potential issues of American automakers building product in Mexican plants, perhaps denying US factory workers employment.
One of his administration’s proposals was to renegotiate or outright dissolve NAFTA, the North American Free Trade Agreement. Another plan was to increase the tariff on Mexican-built cars. Some auto industry insiders are concerned about either idea coming to fruition. Meanwhile Ford has noticeably decreased production in Mexico. It was reported by Bloomberg that they did take a hit to their profits as a result, however.
But has Trump and his administration had genuine affects on the matters? According to an article from Reuters, Mexican auto exports trend 16 percent year over year and 20 percent of Mexican exports go to America.
You read that right. As it stands an estimated 20 percent of all vehicle production in North America comes from Mexico. In April the Mexican Auto Industry Association announced that Mexico managed to build 278,173 vehicles, exporting 228,810. Of the exports, 179,958 went to the US. Overall that is up 15 percent increase compared to the first four months of 2016.
What comes next?
Even during the Obama administration, the renegotiation of NAFTA was on the table. Pundits are predicting that given what Trump has proposed, the new terms may not bode well for Mexico’s auto industry. This is due to the fact that the US makes for Mexico’s top trading partner. Many automakers such as Volkswagen, Nissan, Toyota, GM, and Ford produce their vehicles in Mexico for sale in the US. Trump and his administration ran on the goal of making trade teals such as NAFTS more “fair” for US workers and relations.
In response, Mexico, and Canada, another country involved in NAFTA have taken measures to keep certain provisions secure.
These steps include focusing on relations with sectors most vulnerable to any breakdown in free trade and also sectors that have enough political clout to influence Washington DC.
Since Mexico is particularly concerned about NAFTA they are putting a case together that the 3 countries involved, the US, Canada and Mexico stand to benefit regarding competition in the auto industry overseas, Asia for example.
Other defenses of NAFTA argue that it does indeed support millions of jobs in the United States, and point to stats that indicate U.S. trade shortfalls with Canada and Mexico are declining even with the US’ trade deficit with China grows. Part of IQOM’s mission is to identify sectors where NAFTA rules of origin could be modified to increase regional content.
As of this write up, the U.S., Canadian and Mexican officials are in the heat of a debate how the NAFTA region can reduce auto parts imports from China, Japan, South Korea or Germany.