On Monday, the United States and Mexico struck a new deal on a revised North American Free Trade Agreement (NAFTA) that, at least for the time being, excludes Canada. As all three nations are currently deep in deliberations, a new and rather important detail of the bilateral agreement between the U.S. and Mexico has come to light that limits the amount of cars Mexico can export.
The agreement limits exports of Mexican cars and sport-utility vehicles to the United States at 2.4 million vehicles annually. Any volumes above that level being subjected to a 25 percent tariff.
We previously reported that the new U.S.-Mexico NAFTA agreement calls for 75 percent of automotive content (parts) to be made in the NAFTA region, an increase from the current requirement of 62.5 percent. The change will likely shift production of some automotive parts to Mexico from China.
In addition, the revised deal requires 40 to 45 percent of auto content to be made by workers earning at least $16 per hour. The move will likely result in the relocation of some automotive production from Mexico to the United States, but could also result in an increase in Mexican automotive wages.
General Motors currently operates the following four plants in Mexico:
In addition, GM Mexico operates the following supporting facilities in the country: