Trump Signs NAFTA Replacement Deal, Automakers React

President Donald Trump signed a trade deal with Mexico and Canada that will replace NAFTA and have wide-ranging effects on the auto industry. Carmakers had strong reactions to the United States-Mexico-Canada agreement (USMCA) reached this week.

For a car to receive duty-free treatment, 75 percent of its parts have to be manufactured in North America. That’s up from 62.5 percent previously, as The Detroit News points out. The deal also calls for 40–45 percent of a car’s content to be manufactured in North America with high-wage labor. In a statement, Trump said these plans will prevent auto jobs from going overseas and bring back jobs that have already left.

Canadian Prime Minister Justin Trudeau said the agreement will help maintain the stability of Canada’s economy. However, he lamented the deal doesn’t remove tariffs on Canadian steel and aluminum, urging for more work to be done on this issue. These tariffs have been cited as one reason that General Motors recently decided to make cuts in North America. Earlier this week, GM announced it was slashing jobs at five plants in the U.S.

GM’s Detroit-Hamtramck assembly plant, which will cease production by the end of 2019

Automakers are reacting to the news, and a good portion of it is positive. But they also cited steel and aluminum tariffs as a lingering problem.

Joe Hinrichs, Ford’s executive vice president, said the deal is a key step in achieving fair trade in North America. “We look forward to being a collaborative partner to support the ratification of the agreement in all three markets because it will support an integrated, globally competitive automotive business, helping to drive volume and support manufacturing jobs,” he said. “To achieve the full potential of the trade agreement and to ensure ratification, the elimination of tariffs on steel and aluminum will be critical, and we will continue to work with all stakeholders on this important issue.”

A group that represents all Detroit Three automakers echoed these sentiments. American Automotive Policy Council president Matt Blunt said in a statement, “We commend the negotiators for crafting an agreement that keeps the United States and North American automotive manufacturing competitive and for including important provisions that require the acceptance of vehicles built to U.S. safety standards and address currency manipulation,” while also expressing concern about the steel and aluminum tariffs.

The Association of Global Automakers—which includes Honda, Hyundai, Kia, Maserati, Nissan, Subaru, Toyota, and other automakers—issued its own statement from President John Bozzella: “We hope the U.S.-Mexico-Canada Agreement (USMCA) will support a vibrant future auto market, but the implications of additional costs associated with the complexity and rigidity of the new automotive rules are not yet clear. At a time when steel and aluminum tariffs have substantially increased auto manufacturing costs in the United States, it is unfathomable that this important issue has not been resolved in the context of these negotiations.”

Mexican President Enrique Peña Nieto, who signed the deal on his last day in office, praised the deal for addressing the social impact of international trade, including stronger protections for workers and the environment. The president of the United Automobile Workers union has another take on the situation. A statement by President Gary Jones says the agreement “is not strong enough to protect American workers.” It also said, “We need the ‘New’ NAFTA to make GM and other auto companies rethink mass layoffs while they invest in exploited labor in other countries like Mexico.” Click here for the full statement.

Legislatures from all three countries need to sign off before the deal goes into full effect.

Source: Ford, The Detroit News, Los Angeles Times, The White House

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