General Motors and its Michigan-based rival automakers, Ford Motor Company and Fiat Chrysler Automobiles, might have an easier time dealing with President Donald Trump’s NAFTA replacement than many foreign automakers, which are already talking about expanding production in North America to deal with the stricter requirements of the so-called U.S.-Mexico-Canada-Agreement. The agreement, which still has to be ratified by Congress before it can take effect, includes greater demands regarding the origins of automobile parts and the wages paid to workers throughout the supply chain. If approved, those requirements will be phased in over the next two to five years.
That’s about the amount of time it typically takes for an automaker to develop a brand-new or significantly-redesigned model, The Wall Street Journal notes.
Under Trump’s NAFTA replacement, 75% of a car’s total parts content (by value) will need to come from North America in order to be exempt from import duties – up from 62.5% today. In addition, a certain percentage of the labor performed in making each vehicle must come from workers making a minimum of $16 per hour. That percentage will start at 30%, gradually increasing to 40%, effectively discouraging sourcing too much production from low-wage Mexico. And imports from Canada and Mexico will be capped at 5.2 million vehicles annually, which is far greater than 2017’s 4.1 million imports from those countries.
General Motors and its U.S.-based rivals aren’t likely to have much difficulty in meeting those requirements, for the most part, giving them an inherent advantage as automakers like Mazda and BMW either invest more into North American manufacturing, eat the costs of import duties, or lose sales as their MSRPs rise to accommodate the taxes. One notable exception for GM is the all-new Chevrolet Blazer, which could have difficulty meeting the wage requirements of Trump’s NAFTA replacement as it’s being produced in Mexico.
According to The Journal, Carlos Ghosn (Renault-Nissan-Mitsubishi Alliance) and Harald Krüger (BMW) have already said they’ll invest more into North American production, especially in the United States. Dieter Zetsche (Daimler) has suggested that the new trade agreement could compel Mercedes-Benz to invest in U.S. engine production. The heads of Honda and Volkswagen have both said they will need to analyze the probable impacts of the USMCA before making any commitments.
Stay tuned to GMAuthority for the latest automotive-related NAFTA news.