President Trump initiated NAFTA renegotiations talks earlier this year, but thus far, little progress has emerged from discussions. However, the Trump administration’s most recent proposal has actually become a concern for U.S. auto manufacturers.
The Detroit News reports the Trump administration has proposed a requirement that 85 percent of a product’s parts must come from the U.S., Canada or Mexico, which marks a substantial increase from the 62.5 percent figure today. Additionally, 50 percent of the parts must come from the U.S.
On paper, it seems like a fair adjustment to increase U.S. manufacturing and jobs. However, Alliance of Automobile Manufacturers VP of Federal Affairs, Jennifer Thomas, says the proposed requirement would likely eliminate production and jobs, and not add new work.
“We strongly believe this is going to have an adverse effect,” she said. “It’s going to lead to a decrease in production, a decline in jobs and an increase in cost to consumers. A lot of companies are going to forgo the NAFTA benefit and just pay the tariff, so you’ll see a shift in production to other locations.”
In other words: companies will likely skip the requirement and pay the tariff in order to outsource production to less expensive countries. She added the new rules would hurt the U.S. manufacturing base and curb American industries’ ability to export products.