Zero Hedge
October 8, 2018
Foreign automakers have signaled that they will shift more of their manufacturing to the United States, Canada and Mexico thanks to the recent US trade deal with Canada and Mexico, reports the Wall Street Journal.
Following the United States-Mexico-Canada Agreement (USMCA) or simply “Nafta 2.0” – BMW AG CEO Harald Krüger said this week from the Paris Motor Show: “We will allocate more U.S. production for the U.S. market,” adding that the German automaker already sources a variety of parts in the region.
Deiter Zetsche, CEO of Daimler AG said that the new agreement might force them to move engine manufacturing to the US, where it already builds cars and SUVs at their Tuscaloosa, Alabama factory.
The impact on foreign auto makers’ North American operations from the newly named 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 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. –Wall Street Journal
“These companies are now seeing that there is an element of political risk to operating in the U.S.,” said globam management consulting exec, Johan Gott.
Following the 1994 Nafta deal, automakers worldwide established supply chains based on low or no tariffs within North America – a deal with then-candidate Trump promised to dismantle upon his election after arguing that it eroded the US manufacturing base, sending jobs to Mexico where labor is cheaper.
Nafta 2.0, on the other hand, requires automakers to assemble at least 75% of a car’s value in North America in order to retain…