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:
Comments
Above 2.4 million units , a 25% tariff will apply.
I just wonder how the above number would be divided among all auto companies currently exporting vehicles to the U.S.?
With GM already building the pickups and crossovers in Mexico, I would think their export number to the U.S. must be above 600,000 units.
Mercedes and BMW will soon be opening new plants in Mexico. Maybe this newly added export volume will have to deal with the potential 25% tariff?
The 2.4M cap is good for US workers; although one has to wonder whether car makers will still be doing the math and whether the lower labor cost in Mexico can offset the 25-percent tariff cost.
We’re putting together a report on GM’s figures right now and will have it out within 24 hours.
Yes, GM’s annual export volume from Mexico to the US and Canada is above 600,000 units.
They can either move some production to the US or work with the 25% tariff in relation to Mexico’s lower labor rate… but then we run into the $16/hour requirement.
Given that GM is dependent on the US market, I’m sure they’ll work it out accordingly.
in 2017, 1.8 million vehicles were exported from mexico into the united states. so the 2.4million allows a further 33% increase in production from mexico.
considering that we are near or at peak auto sales, that 2.4 million cap seems safe.