President Donald Trump has been busy outlining his proposal for not only a border wall with the country of Mexico, but how he plans to pay for such a project, too.
The Detroit News reports President Trump will consider levying a 20 percent tariff on Mexican-made goods coming back into the United States to pay for the border wall. But, economists, analysts and Republican congressional members are showing their displeasement with the idea of a new tariff placed on Mexico.
The 20 percent tariff was among other options being considered to respect taxpayer money, according to White House press secretary, Sean Spicer. Still, opposition has begun to stem, especially regarding the implications it could cause for General Motors, Fiat-Chrysler and Ford.
Republican Rep. Justin Amash of the Michigan congressional delegation said, “This would be a tax on Americans to pay for the wall. When and how will Mexico reimburse?” Republican Sen. Lindsay Graham also reiterated that any tariff the U.S. imposes on Mexico, Mexico can levy on American imports as well.
The basic principle of building components and vehicles in Mexico for U.S. automakers is to take advantage of lower labor costs. In turn, automakers can sell vehicles at lower prices to American consumers, and ideally, sell more vehicles.
GM, Ford and FCA all declined to comment on the proposed 20 percent tariff, but FCA CEO, Sergio Marchionne, did warn of “monumental consequences” over dismantling the North American Free Trade Agreement in general.
“The question about repatriation of all of the manufacturing footprint into the United States has got monumental consequences to the industry overall,” he said. “I think there are repercussions that go well-beyond FCA.”
Specifically referring to the border tax, Marchionne raised concerns over “asymmetrical treatment.”
Ford, though, said a border tax wouldn’t hurt the company nearly as much as it thinks.
“So, it could have an adverse impact in terms of them if what we see now as a proposal passes through,” Ford Chief Financial Officer Robert Shanks said, according to a transcript. “And for us it looks pretty attractive actually, not having too much impact at all over the next several years in terms of our cash taxes.”
In 2015, imports from Mexico were valued at $316.4 billion, while the U.S. trade deficit has been estimated at $58 billion that same year.
Comments
I know the focus is on Mexico, but it makes you wonder about the impact on Asia: China, South Korea making the Encore, Poland making the Cascada, etc.. Not to mention Samsung and other products.
And the impact on the Wal-Marts and Costcos in our world – and Costco’s auto buyers club. Oy…
A border tax with Mexico isn’t going to harm automakers because that cost will be passed on to the consumer .
NAFTA does need to be updated and a more level trade relationship should be the major point of negotiations . However I don’t see a trade war / border tax happening because Congress won’t vote to let it happen . Our economies are so intertwined that the end result would cripple our slow growth which was reported today an anemic 1.9% for the last quarter . For the year growth was under 2% as our economy is showing signs of slowing .
Was this even discussed when Trump had the Big-3 at the White House ? Of course we all would like to see more manufacturing jobs come back to America , but the logistics of building a new factory takes months if not years to turn over that first shovel full of dirt .
International trade should be on a level playing field but it hasn’t been that way for decades . And it didn’t matter if it was a Democratic or Republican that held the White House .
But in the end it will be the taxpayer that gets it in the end .
why would you say this isn’t going to hurt automakers?
if something is going to cost more, consumers will buy less, automakers will sell less and revenues will drop.
What we need to understand is that if the president’s policy brings jobs back to the United States then that would offset any reduction in demand due to higher pricing. More people in work means more people who can afford to buy a car. If anything it’s the Mexican market that will see reduced demand as out of work Mexicans find they can no longer afford to buy cars.
The thought that building vehicles in Mexico versus the U.S. saves the U.S. consumers money is a fallacy. Manufacturers sell the vehicles for the same price no matter where they are built, the cheaper labor just makes a fatter profit margin for the company. It doesn’t save consumers any money, it just creates fewer good paying jobs in the U.S. and therefore there are fewer of us who can actually afford the product.
Ask yourself when the last time was that a vehicle’s production was moved out of the U.S. and the price actually dropped. It doesn’t happen. I used to sell GM vehicles, and the sticker on the truck built in Silao Mexico was exactly the same as the one built in Janesville, Wisconsin or Arlington, Texas. I would much rather have my neighbor build my vehicle and contribute to our local tax base, as opposed to someone in Mexico I don’t even know.
Two comments on previous comments:
1st @”GM PDT”: “International trade should be on a level playing field”: In the current state of affairs, where the big corporations and their interests decide, trade agreements like the NAFTA are for having easy access to cheap labor, not for increasing wages, but for increasing profits.
2nd @all: Moving automobile production from Mexico to the USA requires either pushing down wages in the USA to Mexican levels and smasing trade unions, or pushing automation so far as to actually REDUCE the number of manual labor in the factories.
Trump’s talk about “bringing manufacturing jobs back” to the USofA is just a pied piper’s song to fool the US workers into supporting a government of and in the service of billionaires and torturers.
Remember: Ford did cancel their plan to build a new factory in Mexico not for concern for US workers or fear of Trump’s wrath, but because they saw the US market for small cars shrinking, and the capacity of the planned Mexico plant no longer needed.
The reason being the low petrol prices and the return of customer’s interest to those huge gas guzzlers.
Big expensive cars offer higher margins to the auto maker than small cars, and thus can be profitale also when built in high wage areas.
Well this is another miss reported story in the media.
I think few people really have read Trumps book or really have spent time learning how he works.
Trump is not going to get or expect 20% at the boarder. In his deals and in his book long before he ran for office he teaches in making deals you hit them with a big number in your favor to start any negotiation. Then you Work your way to an agreed deal where both parties feel like they won.
This is an age old game that has been played for years with swap meet people. Hell anyone who watches Pawn Stars or Pickers have seen this kind of deal.
Yes many people in business do this and play the game to make or save money.
Trump in his book outlines how he got a great deal on a Jet once with a low ball offer he never expected to get. They worked out a deal and both parties were happy and he got a really good deal.
See deals are like buying a new car at the dealer. You go in with what you think is a fair price and then you offer under it. Then you work the deal up to where you get a good price or the price you want or you walk away. This is how many business work.
As for the government they go in and they are given a price and generally they take it. In senescence the Republicans and Democrats have done nothing but paid sticker price for everything for years in the kind of deal they cut. Most of these SOBs have never been held accountable for anything in their lives but getting elected. In business you have to work differently as you are responsible for the company, Shareholders and employees. Your mistake can cost all of these money or their value.
Like him or not things will be done differently and I am beginning to think it may just be a good thing. The media and the left are going to keep trying to paint him as dangerous, stupid and call him anything and everything they can to demonize him as he is hurting so many deals these folks have cut with people who have been donating to their funds and campaigns.
The right has done the same but since he is there guy they are going to remain quiet accept for a few well paid people.
In the end The deal may amount to a 3% tax as he will not kill business but he will take enough to make them thing about doing future things differently.
It is like calling out these companies. It is not so much what he did or did not do but what these folks will do in the future now they have been called out in front of the public. They will not want to be seen as doing wrong for the country and public. Add to this the 3% tax and there you go.
Trump has been doing the same with Putin. He has not bad mouthed him and he will let it ride and at some point he is basically going to tell him FU and then negotiate a better deal than what we gave to Russia in the last 8 years.
Trust me Putin thinks he is going to control him but so did 18 Republicans running for office as well as Hilary Clinton.
I just thought him to be a rude NYC guy. That is just the way they are. But I am beginning to see he is a very shrewd and smart guy that like Reagan likes being underestimated.
The long and short of it this will impact the automakers to a small degree but not to 20% and they will plan for the future to move what they can here and keep what they need to there. Trump is only looking for this.
Trump knows that he is not going to get everything back. But he knows as of now we are not getting much of anything back now. He will get back some of this as he will help companies to they can better do business here as the last 8 years were hostel to doing business.
Right now the people who have been in office for nearly 25 years have done little to keep much here. Some have taxed to the degree it discourages any kind of business. Regulation have hit so hard it is better to go else where. The companies like Trump are not expecting it all to be rolled back but just given a break to make it easier to do business.
Like the CAFE the automakers are not expecting it to go away to to be cut back. They just want the 2025 regulations delayed a bit to better give them time to build more of a EV product base. It is going to take longer unless some breakthrough comes in so all they want is a delay to get more product and better products out and selling.
Like the wall deal. Trump said they will pay for it. Well watch as he will make a deal and make them pay for part of it and other money may come from funding we send there now that will get cut off.
He knows as well as anyone we can not crash Mexico as China< Russia or even Iran could come in and help fund Mexico and make it even worse than it is. Hell the drug dealers could take over the country if we are not careful. Too many Americans think Mexico is like the resort towns. Mexico is very poor and very desperate and dangerous. I have been to places I was glad to leave there. You really have no clue till you have been there.
Scott, why is it that your comments are always this long? Most time longer than the very article you are commenting on? I quit after the first 2 paragraphs
I just do it irritate you!
” The art of the Deal ” wasn’t written by Donald J. Trump but by journalist Tony Schwartz in 1987 .
Trump may be a master negotiator in business but our Government doesn’t work like a business there is Congress that holds the purse strings and there are tons of red tape that hold up many of a Presidents bills .
And it’s the American way to always barter the price of a car or house or items at a garage sale . The thing is you need to come to the table with strength and as much information as possible .
Trump isn’t a politician and that is what got him into office and the power elite is scared of him which they should be . Mexico needs to help us control our border , and should be thanking the U.S for even being in NAFTA which was partially done to help build up their middle class and buy some our products , but China figured a way to build products cheap and flood markets with their goods . Lead based paint on our childrens toys and an enviroment that has the worst air quality in the world .
The sad fact is that the auto companies are not going to close assembly plants in Mexico where they pay the workers 8 bucks an hour and turn around and pay the UAW worker 20 bucks an hour . The companies will invest in even more automation which will require even fewer workers . It’s all about profit .
At least, PDT recognized the facts in his last paragraph.
But “the power elite” is certatinly not scared of Mr. Trump — look at his cabinet: a long list of multi-millionaires, billionaires and military. The power elite sits in Trumps cabinet.
If you want to know more about Mr. Trump’s unscrupulous use of power, look at his record as a landlord, and the record of his father Fred Trump. For exemple how the famous singer-songwriter Woody Guthry related his experience as tenant in the Trump housing empire:
“Woody Guthrie, ‘Old Man Trump’ and a real estate empire’s racist foundations” by Will Kaufman
http s:// http://www.theguardian .com/music/2016/jan/22/woody-guthrie-donald-trump-real-estate-empire-racist-foundations
I have always said that D. Trump getting elected to the POTUS office is the ultimate proof of the Peter Principle, which says that people get promoted from level to level until they reach a position for which they are not suited for.
He will soon find out that he can’t remove the people he has to deal with by the simple “You’re fired” which he learned as a TV star. And that he neither can deal with them as the landlord with a unruly tenant.