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.
Comments
Actually it may have been better if there was no treaty which meant 25-percent tariffs on all Canadian goods coming into the United States which have forced General Motors to bring back all their manufacturing plants to the United States.
More great news for President Trump: America’s unemployment rate falls to 3.7%, lowest since 1969!!!
While we all know the bloggers and trolls on this site are still butthurt about losing to President Trump (not as smart as they claim to be, obviously), the American people are benefitting from President Trump’s bold leadership. He won on NAFTA (now USMCA), he won on lowest African-American and Hispanic unemployment levels ever, he beat China already on trade…Remember when Sean and others were scaremongering us about China and how it would “destroy the American economy”? lol. Stock market at record highs almost every day…Trade coming back to the country in the trillions…GDP now almost 5%, which is incredible.
The only people that will down-vote this post are butthurt left-wing Demoncrats and their Canadian lefty nationalist counterparts. They don’t matter anymore when you are WINNING!
Trump’s trade war is a complete failure. US exports are collapsing while imports are increasing. The largest auto exporters in the US, BMW and Mercedes will soon implement plans to move production out of the US. American car sales in Canada and Mexico are also falling with lots more to come.
U.S. trade deficit jumps to six-month high in August
https://www.investing.com/news/economic-indicators/us-trade-deficit-jumps-to-sixmonth-high-in-august-1634452
Why is it that that 50% of the US is populated by cretins and morons. Too much inbreeding or was it that early immigration was probably thieves, beggars and prostitutes? Certainly not the best genetic stock available… LOL And then the best of what was there, the British Loyalists, moved to Canada during the war of independence as well as the civil war.
The world just keeps getting better:
From MSN: Auto Makers Consider Shifting Manufacturing to North America, Especially the U.S. (a.k.a. the news that GMA “forgets” to report)
Foreign car makers are considering moving more manufacturing to North America from their overseas plants following the recent U.S. trade deal with Canada and Mexico (Thank you, President Trump).
Within days of the U.S. and Canada reaching a pact to replace the roughly 25-year-old North American Free Trade Agreement, executives at several foreign car makers said they are considering changes to their supply chains that would shift more auto-parts manufacturing work to the U.S. and Mexico.
“We will allocate more U.S. production for the U.S. market,” BMW AG CEO Harald Krüger told reporters at the Paris Motor Show this week. He said that the German car maker already sources many parts in the region, but the new trade pact will accelerate a shift in investment.
Daimler AG CEO Dieter Zetsche said at the same event the new agreement could force it to shift more engine manufacturing to the U.S., where it builds cars and sport-utility vehicles at a factory in Tuscaloosa, Ala.
The impact on foreign auto makers’ North American operations from the new United States-Mexico-Canada Agreement, which still has to be approved by Congress, remains unclear. But many in the auto industry see the pact as evidence of President Trump’s tough and successful approach to trade at a time when he is threatening new tariffs on European and Japanese auto imports.
Industry consultants say auto makers are growing increasingly nervous that more restrictions could emerge as Mr. Trump turns to trade talks with Japan and the European Union.
Carlos Ghosn, head of the Renault-Nissan-Mitsubishi alliance, said the new United States- Mexico-Canada trade pact would spur the car-making group to invest more in both the U.S. and Mexico, but didn’t provide details. Honda and VW said in separate statements that they are still analyzing the potential impact of the deal on their local operations.
Mazda Motor Corp., which relies on Japan for engines and transmissions, would also struggle to meet the higher content requirements on its Mexico-built Mazda3 compact car. Which will mean more business and jobs for American auto workers.
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The wage requirement is for the entire employee list, not just the workers making vehicles, and it’s based on _value_ not number of workers, so a higher paid section of the workforce makes up a proportionally higher amount of the figure.
When you include R &D, marketing, accounting, the finance division and all the back operations like warehousing and spare parts, GM would already exceed the 40% figure for vehicles entirely made in Mexico.
Informative blog I can say , something very different with the others .