ASSESSMENTS

How Trump's Tariffs Would Disrupt the North American Auto Industry

Aug 20, 2018 | 04:00 GMT

Ford Explorers leave a Chicago assembly plant during October 2017.

Ford Explorers leave Ford's Chicago Assembly Plant on Oct. 18, 2017, in Chicago, Illinois. The United States could announce tariffs or quotas on imports of finished vehicles and auto parts in the next six months, which could very well raise the price of vehicles in the United States.

(SCOTT OLSON/Getty Images)

Highlights

The United States could announce tariffs or quotas on imports of finished vehicles and auto parts in the next six months, which could very well raise the price of vehicles in the United States.
Because of tightly integrated supply chains and extensive reliance on the U.S. market, automakers in Canada and Mexico will suffer as a result of any U.S. trade barriers that are imposed.
The United States will use the threat of auto tariffs to negotiate stricter rules of origin requirements in the NAFTA talks. But even if Washington gets its way, it may still use tariffs to dissuade future automotive investments in Mexico.
Tariffs and NAFTA concessions could threaten Canadian Prime Minister Justin Trudeau's 2019 re-election bid and cause Mexico's government to hold off on heavier social spending.

By using tariffs as a weapon in NAFTA negotiations, U.S. President Donald Trump could end up harming automotive networks that have taken decades to build. As home to one of the largest car-importing nations in the world, North America has attracted numerous companies supplying the U.S. market with Canadian and Mexican finished vehicles and parts. The size and complexity of the U.S. market has led to the sprouting of a network of supply chains across the continent -- first to capitalize on Canadian manufacturing capacity and later to take advantage of far cheaper Mexican labor....

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