By on February 3, 2017

2013 Jeep Wrangler

President Donald Trump doesn’t want to waste any time renegotiating — or replacing — the North American Free Trade Agreement.

Yesterday, Trump announced his intention to speed up the start of negotiations, leading to much diplomatic scurrying and plenty of confusion among the ranks of North American suppliers. No one knows how the trade landscape will look once talks wrap up.

While the move aims to boost U.S. employment, many U.S. companies, as well as America’s neighbors, fear downsides from potential tariffs.

“I would like to speed it up if possible,” Trump told a bipartisan committee of Senate and House representatives. “You’re the folks who can do it.”

Wilbur Ross, Trump’s pick for commerce secretary, will lead negotiations. The administration must provide Congress with written notice 90 days before the start of talks.

“I want to change it and maybe we do a new NAFTA,” Trump said. “Maybe we put an extra ‘F’ in the term NAFTA. You know what the ‘F’ is for, right? Free and fair trade. Not just free trade.”

He added, “I don’t care if it’s the renovation of NAFTA or a brand new NAFTA, but we do have to make it fair.”

Mexico, which Trump previously threatened with a 20-percent tax on imported goods (after threatening 35 percent before the election), is reportedly embarking on a 90-day consultation process with business groups. Canada, which remains open to new trade talks, recently booted its foreign affairs minister in favor of a shrewder negotiator.

In terms of the auto sector, the main worry remains the impact of increased taxation on goods manufactured in Mexico. Both suppliers and car manufacturers could face increased costs. Indeed, 65 percent of all foreign industrial investment in Mexico comes from auto suppliers, and 19 percent of auto parts firms operating in Mexico are American.

Because of the lengthy nature of the supply chain, many auto parts move across borders several times before the finished product rolls of the assembly line. Would a part end up being taxed multiple times?

“Are you going to charge a tariff four times? It cannot be done. You have to sit at the table, talk and explain it,” said Pierre Alarie, Canadian Ambassador to Mexico, in an interview with the Mexican newspaper Reforma. The complex nature of the auto industry makes a 20-percent border tax a non-starter, he said.

There’s also the chance Trump could increase North American content requirements for vehicles. That would reduce the number of parts imported from Asia, while spurring investment in the U.S. (and possibly its neighbors). It could also increase the cost of a vehicle.

“It’s all in the way you write the rules,” Eric Miller, head of consulting firm Rideau Potomac Strategy Group, told CBC.

Shifting production of auto parts made in Mexico back to the U.S. would take time, and many suppliers would have to weigh the costs and alternatives first. Brandon Stallard, CEO of the Michigan-based automotive industry company TPS Logistics, told The Detroit Free Press suppliers are gearing up for possible changes to their operations.

“When you are talking about NAFTA, absolutely, folks are very concerned,” he said. “And frankly (companies) don’t believe they can pivot fast enough.”

Stallard added, “I spent some time last week with a group of suppliers and … they very definitely are looking at contingency plans.”

[Sources: CBC, Toronto Star, Detroit Free Press] [Image: Fiat Chrysler Automobiles]

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61 Comments on “Uncertainty Reigns as Trump Hits the Throttle on NAFTA Reform...”

  • avatar

    Huh, that’s interesting BF Goodrich Mud-Terrain tires going on that Jeep.

    I would have thought an OE would go in for an all-terrain tire. MTs work great off-road but on road, especially in snow and ice conditions they are the truck equivalent of a summer tire.

    I always marvel at the truck-bros in their brodozers with mud-terrains trying to navigate wintery roads like that in combination with 4WD is the ultimate problem solver.

    Doubly so when its a “stanced” pick-up with the prow stuck up in the air and the tail dumped down like its towing something about five times too heavy for the truck compounded with low profile off-road tires (WTF!).

    • 0 avatar

      I’ve seen such a variety of tires on new-ish Jeeps I can never figure out what was factory and what was – OMG I have to have that tire.

      My favorite though was a Wrangler Renegade with a soft top and Michelin LTX M/S tires. Nothing wrong with those tires but seems like a guy who is desperately looking for a quieter ride, which misses the point of a Renegade.

    • 0 avatar

      Even though MT tires are the wrong compound to make a good winter tire they do pretty decent in snow and slushy conditions. I’d say maybe even better than most A/T’s. Where they are at their worst is when temps fall down to single digit territory and on icy roads.
      Also width plays a major role here. Being most MT’s are wider it’s easy to see how they get such a bad rap but stockish sizes aren’t as bad as most people think.

    • 0 avatar

      Rubicons come with BFG MTs, owing to its enhanced off-road equipment, but “lesser” Wranglers usually are equipped with ATs or even modest street treads on base Sports. Looking at photos from my local Jeep store, there’s a Sahara with Goodyear Wrangler SilentArmors, and a Sport with Wrangler SR-As.

  • avatar

    I think this is a poor move.

    I’ve contended that the *threat* of a Tariff and NAFTA reform is actually more effective than *actual* reform because corporations currently are currently facing an unknown, the only truly safe path is domestic manufacture.

    Once you create an ACTUAL Tariff or NAFTA reform, beancounters will *immediately* find and exploit the loopholes to allow them to do the minimum necessary to comply.

  • avatar

    Make America Great Again by making Americans pay more for cars! Yeah!

    • 0 avatar

      This. I’m not replacing my CR-V until I see Chinese cars hanging in blister packs at Walmart. And four figure price or forget it.

    • 0 avatar

      You can blame the UAW and their outrageous wage and benefit packages in part for the high costs of today’s cars. Regulations and gov’t mandates also raised the cost of cars unnecessarily.

      And if Trump succeeds in reforming NAFTA and brings more auto jobs back to the US, this will only embolden the UAW and other unions to ask for even higher wages and yet more benefits, raising the prices of all things automotive even more.

      Who knew that Trump was a union man? Even Richard Trump ka didn’t know!

      What a gift for American unions! Viva Trump!!!

      • 0 avatar

        Management signed every last one of those union contracts. It takes two to tango.

        • 0 avatar

          dal, sure they did! But what was the alternative?

          Yes, management caved.

          The alternative was to escape to Mexico, but that avenue is now blocked.

          I was sorry to see that, but Trump is the unions’ guy in the White House with his mantra of jobs, jobs, jobs.

          And those who voted for him are going to pay the higher prices for his pro-union policies.

          Hey, even Richard Trump ka is singing The Donald’s praises!

          • 0 avatar

            The alternative isn’t just Mexico, but any southern state. And the union knows that perfectly well, and will negotiate with it in mind if actually asked to negotiate.

            Management at the time quite deliberately set up unmanageable long-term liabilities for short-term gain. That is a standard practice to this day in American business and management doesn’t get off the hook for it just because the big bad evil unions might threaten a strike.

            Of course that’s not to say that management is the only party that can be shortsighted. Some unions’ embrace of snake oil protectionist policies (and the orange president selling them) shows that perfectly well.

          • 0 avatar

            Judging from the previous migration of autojobs and others to Old Mexico, seems to me that moving to Mexico resulted in the greatest Return on Investment for the shareholders/owners.

            I was a proponent of more automakers packing up their factories to escape the harassment of the unions. But those hopes are now dashed.

            Union involvement in the jobs, jobs, jobs effort is going to be worse than it ever was, because the unions are now emboldened by Trump’s election and his stance on providing high paying jobs to Americans, at any and all expense to the purchasers of those goods and services.

            Trump may help ease many regulations and mandates but the price of goods and services will go through the roof in the next 4-8 years.

        • 0 avatar
          Master Baiter

          “Management signed every last one of those union contracts. It takes two to tango.”

          And Moe Green signed the contract to sell his casino to the Corleones.

          • 0 avatar

            heh, heh, heh.

            The severed horse head was in there too someplace.

          • 0 avatar

            Right, because being moderately inconvenienced is the same as having concrete blocks tied to your feet and dropped in the river.

          • 0 avatar

            dal, there’s more stuff coming down the ‘pike.

            I’m amazed at what this guy has already done in two weeks and what more lurks ahead.

            As time progresses and more of Trump’s declarations, intercessions and actions start to take effect, more and more people may find their beliefs and tenets

            “being moderately inconvenienced and the same as having concrete blocks tied to your feet and dropped in the river.”

            I’m deadly serious. This new guy is not fooling around!

          • 0 avatar

            “I’m amazed at what this guy has already done in two weeks and what more lurks ahead.”

            yes, he’s hard at work unwinding everything put in place after the Great Recession. So in 5-7 years when the next crash means I lose my job, can I expect you to give me the pound of your flesh I demand?

      • 0 avatar

        Adjusted for inflation and especially content, cars are a screaming deal now compared to any other time in history.

        Just this morning I was reading a review of the then-new ’99 Miata on Road & Track. As-tested price: $24,000 ($35,000 in 2017 dollars). The base price of a new Miata today, which contains more content than available in ’99, a 0-60 time 2 seconds quicker, crash standards 18 years more advanced (which have contributed to a steady decline in deaths per mile driven), more sophisticated suspension, and better fuel economy: $24,900.

        Shall we compare something more practical like a Civic?

        Or how about luxury cars, which in the early 80s featured things like 120hp V8 engines and rusted barely after leaving the dealers’ lots?

        • 0 avatar

          “Adjusted for inflation and especially content, cars are a screaming deal now compared to any other time in history.”

          Correct. But if you ain’t got no money, you ain’t got no money.

          And if you ain’t got a job, you ain’t got no money.

          BTW, as you may already have heard on the news, Trump may take a page out of Bill Clinton’s play book and force people to take a job, any job, rather than collect taxpayer bucks and live on the dole.

          • 0 avatar

            So the economy sucks, that’s not news. What does that have to do with your claiming that today’s cost of cars is high when they’re actually cheaper than they’ve ever been?

          • 0 avatar

            “What does that have to do with your claiming that today’s cost of cars is high ”

            Prices could be lower, and we see that with the ginormous discounts offered on the hood in order to move all that iron, like $11,500 off MSRP on a pickup truck!

            I bet if we ever start seeing imported Chinese cars sold in Big Box stores, we’ll see lower prices yet.

            But I doubt that will happen during Trump. Trump backs the UAW and other unions, as indicated by his meeting with their bosses.

            Car makers in America index their prices against the highest cost of cars in the market.

            There is no incentive to sell for less, although Camry and Altima offer outstanding under $20K values against their competitors each model year.

          • 0 avatar

            The Clinton plan is still on the books.

          • 0 avatar

            “BTW, as you may already have heard on the news, Trump may take a page out of Bill Clinton’s play book and force people to take a job, any job, rather than collect taxpayer bucks and live on the dole.”

            They will probably just disappear, automation is coming on strong in many sectors. No need to hire meatbags when a robot of some description will do.

            I always get a laugh when somebody posts the obligatory “see what happens when you ask for blah blah blah” (usually in response to a livable wage) and they show a kiosk for ordering at a McDowell’s.

            That’s going to happen even if they have some sap’s foot staked to the ground and they are damn near working for free. The advantages to automation far outstrip even some minimum wage worker that would be denied overtime.

            Low wage low skill jobs manned by actual humans are an endangered species. Especially if it doesn’t require any sort of judgement and its a static environment.

      • 0 avatar

        “You can blame the UAW and their outrageous wage and benefit packages in part for the high costs of today’s cars.”
        Yes. All of those high paid union robots are killing the auto industry. Labour is a small part of the equation. 85% of lost jobs have been due to automation.
        You saying that if workers got 5 dollars an hour, more of them would be employed?
        ” Regulations and gov’t mandates also raised the cost of cars unnecessarily.”
        How dare regulations force auto makers to build safe and durable vehicles that don’t cause excess harm to the environment.

        For shame….. For shame.

      • 0 avatar

        LOL, you really think Trump’s blue collar base is pining for $10 hr auto assembly jobs? The jobs Trump keeps moaning about leaving were the highly paid union jobs. Building a car at Walmart wages is no better than working at Walmart.

  • avatar

    Lots of uncertainty in any number of sectors right now…including the one I work in (home financing).

    The Twitter Duce bit is doing us no favors yet, that’s for sure.

    • 0 avatar

      “Lots of uncertainty in any number of sectors right now…including the one I work in (home financing). ”

      I don’t think you have to worry about home financing.

      My wife and I are currently in the process of divesting all of our real estate and rental holdings and placing them in a trust to benefit our kids and grandkids.

      I started this process last year in anticipation of a Hillary presidency. I was too hasty. But who knew?

      The people I have talked to during this lengthy ordeal of transfers, quit-claim deeds, divestment and redirection/reinvestment of returns, are all, without fail, highly optimistic about Trump and his attitude toward the financial sector.

      Much to chagrin of Sen Elizabeth Warren, who favors the stifling Dodd-Frank requirements on the financial sector.

      • 0 avatar

        We saw in 2008 what happens with a deregulated financial sector.

        And we saw it before that in 1929, and before that in 1873, and before that in 1791.

        Dodd-Frank is too complicated, but the financial sector needs to be regulated to an extent, and it always opposes such regulation. The simplest way would just be strict limits on leverage, but the banks told Congress they’d rather have Dodd-Frank than that.

        • 0 avatar

          dal, you make excellent points. And that’s why I believe that when a business or investment firm, or whatever, goes under, it should stay under.

          You may already know that I am not a fan of Too Big To Fail, nor of the bailout of GM, banks, mortgage firms or financial institutions.

          We should have done with GM what we did with Chrysler, given that carcass away along with a bribe.

          If you or I make a bad decision, only you and I suffer the consequences, or go bankrupt.

          The taxpayers do not step in to bail us out.

          It should be the same for businesses.

          • 0 avatar

            Problem with “let it die,” though, HDC, is that a large part of the *entire banking sector* would have basically died. And if that happened, then millions of people would have been absolutely screwed. Banks would have gone under and FDIC would *not* have been able to cover the losses. Bush held his nose and did the bailout, which was the right thing to do.

            I’ll be interested to see whatever regulations Trump wants to reduce “bigly” but as someone who’s been doing this for 15 years, and saw all the abuses that happened the last time around from the very front row, they need to tread VERY carefully. Some of these regs are cumbersome, but they’re necessary.

          • 0 avatar

            FreedMike, I understand completely! There are always many ways of looking at the same facts, yet drawing differing conclusions.

            There are more than just two opposing factions in that matter.

            Some would like the full faith and credit backing of the US to be behind what are considered Too Big To Fail businesses of all types. This encourages reckless investment behavior, like it did before 2008.

            Others are diametrically opposed to all that, while yet others may seek to find a selective third way, like bailing out GM, et al in 2009.

            Regardless, Trump is the guy in the hot seat for the foreseeable future, and he has a decades-long track record of being his own man and calling his own shots.

            Trump claims that he will use those leadership qualities to benefit ALL Americans.

            That remains to be seen.

            But the last guy in power told Joe The Plumber that WE, THE PEOPLE, needed to spread America’s wealth around, taking from those who worked for it, and give it to those who don’t want to work.

            I am saying these are most interesting times to be an American, and I hope to welcome the changes that will benefit me and mine.

            I’m NOT a Trump fan. Didn’t vote for him.

            But by Golly I’d rather place MY financial future in Trump’s hands than the hands of some failed community organizer who found his political beginning in the failed Second City called Chicago!!!

    • 0 avatar

      I work for a manufacturing company and there is a bit of a concern as a number of raw materials and small components are imported to make the end product. Unfortunately some of the components have not had US made sources in decades so it makes for a source issue or raising prices.

  • avatar
    Big Al from Oz

    I do believe Trump has a disconnect in how the world functions.

    His paradigms are immature to say the least.

    As I’ve pointed out earlier if Trump has his way vehicle prices will rise in the US. This along with his constant attacks of friends and allies acts as a multiplying factor. This doesn’t take into account other goods and services that moves between the US and other nations.

    Just his naive view stating Australia takes advantage of the US shows he has no understanding of the truth, let alone the facts. Australia imports 5 times the value of goods and services from the US than the US buys from us.

    So, Australia could state the US is equivalent to Mexico or China. But we don’t. We must compete and offer competition.

    If the US can’t compete, which is what Trump is alluding to, then the US must find ways to improve its position.

    Mexican and Chinese products are more competitive than US goods, penalising the American populace by more expensive cars, etc will increase unemployment and reduce the standard of living.

    The US has reached an “Early 20th Century European Moment”. Not much different when Europe had to compete with a fast mass production industrialisation of the US economy.

    Your cars will be more expensive, as most other products. This doesn’t take into account the reduction in USD value.

    But hey, You want to compete with Mexico and China, then expect your living standards to be closer to theirs.

    • 0 avatar

      “I do believe Trump has a disconnect in how the world functions.”

      We’ll see.

      I remember the experts telling us Trump had no idea how to run a successful election campaign. They said:
      -His team was in disarray
      -He had no clue as to how to deal with the media
      -He was making lethal mistakes
      -His negatives were way too high
      -He was a political neophyte
      -He absolutely COULD NOT WIN

      Yet he won against the veteran political powerhouse Clinton machine that had the endorsement of the incumbent President.
      And this while being opposed by the media, the democratic party and half of the republican party establishment.

      Maybe this 70 year-old international businessman knows a little something.

    • 0 avatar

      Most countries are trying to figure out Trump. His politics are being seen as a boon to China. Tearing up the TPP and his rants about tariffs is making countries in the region take a second look at China. China is being seen as “stable”. Any country with second thoughts in relationship to human rights issues are now looking at China differently.

      • 0 avatar

        Stable like Pre War Imperial Japan. Militarised Islands, including one in the Arabian Gulf, threatens 95% of World Trade. Increasing Military buildup is also very unsettling

        • 0 avatar

          RobertRyan – global instability is going to benefit a few countries i.e. China and Russia. Fortunately for “western” countries, those two big boys don’t get along.

          • 0 avatar

            It will certainly benefit Russia.Putin is playing a smart almost imperceptible, manipulation of events

          • 0 avatar

            RobertRyan – Putin is playing the long game. At the rate Trump is going, it won’t need to be a long game.

  • avatar

    When you shoot first and ask questions later, you shouldn’t be too surprised that most of the victims are friendlies.

  • avatar

    Wouldn’t a new trade agreement need to be drafted and agreed upon by the us house and senate?

    Those are both controlled by republicans. Since when are republicans for import tariffs or whatever it is Trump means by “fair” trade. Even democrats love to blather on about “free trade”, and whole-heartedly embrace neoliberal international corporate hog-wash these days.

    Who’s looking out for the American worker in congress?

    I’m not very optimistic. And when has Trump ever done anything to benefit working people?

  • avatar

    Interesting podcast over on Planet Money. They suggest that behind Trump’s bs is a plan to reform business tax to be more like a VAT that many other countries do.

    • 0 avatar

      My understanding is that American-made export goods (i.e. Harley-Davidsons, etc) are taxed prior to leaving the US, by the US, and then taxed again by the importing country. Ditto cars, food, whatever.

      Trump proposes to drop the US tax on American-made exports, and levy a tax on everything imported, a tax that does not currently exists in the US.

      This approach makes sense to me, and would also irritate more foreign manufacturers to open plants in the US, like Toyota, Honda, Nissan, Hyundai, Subaru, etc. did in the past. Thus bringing jobs, jobs, jobs to America.

      Hell, even Apple’s Foxconn is going to open a factory in CA. Jobs, jobs, jobs.

      • 0 avatar

        The PM makes a point that as imports become more expensive, the dollar rises which makes imports a good deal again. In the end it all equals out. Of course this is all economic theory and we can be assured there will be plenty of loopholes.

        • 0 avatar

          Trump has voiced his concern about the value of the dollar rising against other currencies which would make American-made goods more expensive for them.

          No doubt we’ll see some upheaval in the global economy.

          • 0 avatar

            Impression I am getting strongly the ” Trump Effect” is being cauterised by the EU.
            Now EU is stronger as against a perceived external threat
            Must admit their is some humour in the EU reps name, by the way he is Polish. Maybe the two DT’s will make a joint statement?
            “European Council President Donald Tusk has called Donald Trump an existential threat to Europe, in an extraordinary attack on the new US President.

            In an open letter delivered to leaders of the 27 member states, Mr Tusk included the new American President as part of a group of “dangerous” challenges facing the bloc, citing Russia, China and radical Islam as other threats. “

          • 0 avatar

            RobertRyan, I have to agree that Trump is an existential threat to many people, places and things.

            Among them Europe and its economy, China and its economy, Muslim terrorists all over the planet, and illegal aliens in the US.

            By getting other countries to welcome illegals with open arms, Trump has already won a great victory. His stance is that he doesn’t want illegals in the US. He promised to throw out the criminals first.

            And it won’t surprise me if Guantanamo Bay will be the destination for illegal aliens who keep coming back into the US.

            But first, outlawing or heavily taxing remittances sent by illegal aliens in America to their home countries.

            He’s got that great Wall to pay for.

      • 0 avatar

        HDC, there are taxes and there are taxes. I am not aware of any export tax on US-made goods – what do you believe this to be?

    • 0 avatar
      dash riprock

      In Canada, we before we had our form of a VAT (gst) imposed there was a tax on manufactured goods(MST). This 14% tax was removed as part of the tax change. Of course because Canadians did not see the MST, huge chunks of the populace was outraged at this new tax. The Liberal Government of jean Chretien campaigned on the promise of removing the GST(never explaining what would replace it). They won handily but reneged on the promise.

      In the same election the Chretien Liberals other vote winning promise was to scrap the Canada/US free trade agreement. They of course did not but rather signed NAFTA.

  • avatar

    Serious question: what exactly will American negotiators ask for? I hear the idea of Free and Fair trade, but what constitutes fair trade? The answer from the left tends to focus on the wages, working conditions and environmental regulations of the developing nation. I’m guessing that’s not Trump’s focus.

    So what is?

    • 0 avatar

      Guessing Trumps motivations isn’t my specialty, but most people seem to mean “what I want the way I want it when I want it and I don’t have to feel bad about it”. That’s fair.

    • 0 avatar

      A look at Trump’s tax returns could reveal a source of his motivations. You know that anything he does, he will do to protect/enhance his own (oh, sorry, his children’s) business interests, and those like them.

  • avatar
    el scotto

    In the end, vehicles parts made in Mexico probably won’t be subject to a tariff. Good ole USA assembly, ya know? But only for the Big 3. VW, Nissan, Honda, et all (those furrin non-union manufacturers) won’t get a tariff “pass”. Big 3 vehicles made in Mexico? Another tariff pass; claims of the money going to “Detroit” or the repair parts will be made in the good ole US of A. What is more probleming about the tariff is that the best European/Japanese vehicles may not make it to the US due to tariffs. Then again, mediocre Japanese cars could be GM’s wet dream.

  • avatar

    My main fear is that smaller manufacturers may end up leaving the U.S. Take Mazda, for example. I own two of their recent products, so the company’s future here is of some interest to me.

    Mazda is already a tiny automaker with tiny sales. They manufacture their cars in Japan, and more recently, Mexico. If Trump slaps tariffs on the Mexican-made cars, that will either force Mazda to raise the prices of those, or move all production back to Japan. Producing and exporting here from Japan is already expensive, and will probably become even more so. If the budgets don’t make sense, I could see them giving up here in the USA – a la Suzuki in 2012.

    Subaru, the other tiny Japan automaker, has it a bit better since they manufacturer some cars in Pence’s home state of Indiana.

    Anyway, if I’m left with two orphan cars with zilch resale value and hard-to-find parts, I’m not going to be a happy camper.

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