By on April 5, 2018

Ford Winamac, Indiana BraunAbility Plant

The United States is softening the contentious automotive content requirement mandates pushed by the Trump administration as part of NAFTA renegotiation talks. While the demand is only one of many asks coming from the U.S., both Canada and Mexico said forcing 85 percent of a vehicle’s overall content to be sourced from the three countries (in order to side-step tariffs) was a nonstarter. Over the past year, the issue became a major sticking point in the trade talks — hindering progress and possibly dooming them to failure.

While Trump’s intent was to bolster domestic employment by incentivizing North American parts suppliers, automakers expressed concerns and noted it was often difficult to reach the current threshold of 62.5 percent.

The United States has now proposed applying the new content requirement only to major components (like a vehicle’s powertrain) while leaving fasteners (nuts, bolts, etc.) alone. As an automobile is made up of tens of thousands of individual parts, deciding what should and should not be counted will make a big difference. Still, some manufacturers are likely to have difficulty meeting the proposed content requirement on critical engine components. 

According to Bloomberg, no agreement has been reached thus far and Mexico and Canada could still reject the new proposal. But it’s a step toward compromise — a tactic which none of the member states have really taken advantage of during negotiations.

Despite trade talk updates taking on a more optimistic tone since the start of 2018, very little progress has been made. The three countries are still a long way from reaching an agreement and time is quickly running out. While the U.S. takes a softer NAFTA stance in the wake of Donald Trump’s global trade issues, Mexico’s presidential election is fast approaching. Leftist frontrunner Andres Manuel Lopez Obrador has already suggested suspending trade talks until after the July election and his selection for foreign minister, Hector Vasconcelos, has already said the death of NAFTA wouldn’t be “the end of the world.” There is a very strong chance that, if negotiations aren’t settled before July, a newly elected Lopez Obrador may decide to suspend them indefinitely.

Currently, the United States takes about 80 percent of Mexico’s exports. A breakdown in trade would likely be disastrous for both countries in the short term. But most Mexican politicians, including Lopez Obrador and Vasconcelos, have said it would be important to maintain a working relationship with the U.S. while pursuing additional trade opportunities in Europe and Asia.

Meanwhile, Canadian ambassador David MacNaughton painted a similarly bleak picture for NAFTA. “I don’t know what an agreement in principle looks like, really,” MacNaughton told reporters Wednesday in Toronto. “There’s still lots of issues. There’s differences of opinion and we’re going to work hard to try and narrow down the gaps and get to as much of an agreement as we possibly can.”

For automakers, a winning NAFTA strategy is one that minimizes import/export hurdles, is easy to understand, and remains logistically feasible. But most manufacturers rely heavily on foreign suppliers and would have difficulty meeting the 85 percent quota — domestic assembly frequently does not mean domestically sourced parts.

“We appreciate U.S. negotiators’ goal to support American jobs,” Ford spokeswoman Christin Baker told Bloomberg. “However, there is a concern that significant changes to the rules of origin would not achieve that shared goal. We look forward to seeing the official details, and we continue to urge negotiators to include enforceable rules prohibiting currency manipulation in a revised NAFTA.”

As the general tone surrounding the talks loses some of its negativity, most representatives and spokespeople are careful not to come across as overly optimistic. Kelly Craft, the U.S. ambassador to Canada, may have been the only official with an upbeat voice this week. “We all want a good outcome … There’s no reason to tear NAFTA down,” she said recently in Toronto. “I’ve got every confidence that together, we will fix NAFTA.”

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35 Comments on “Team Trump Eases Demands on NAFTA’s Regional Auto Content...”


  • avatar
    TW5

    US trade deficit for automobiles imported/exported in NAFTA is -$60B. No surprise, Mexico’s surplus is over 2/3 of that figure.

    The auto manufacturers need to quit whining about the NAFTA content requirements, and start applying pressure to suppliers. They like to pretend that American content isn’t accessible for financial means, and if DC will just fix the exchange manipulation, all will be well. In reality, car manufacturing is still dirty, particularly electronics manufacturing and batteries. The easiest solution is pumping bilge into the Chinese countryside. Anarcho-capitalism is the real reason businesses choose China, not cheapness, though exchange rates are an ongoing issue regardless because cheap yuan thwarts US goods exports.

    • 0 avatar
      Big Al from Oz

      TW5,
      Why?

      Do you buy your gas at the most expensive gas station? Do you ever pay retail for a new vehicle?

      So, why should it be any different for anyone else on the planet ……. or are you special?

      • 0 avatar
        TW5

        We are doing what the world does for the first time in decades. Predictably, the rest of the world hates it because they are accustomed to using the US as a cash machine. Most of their growth is financed on the backs of American taxpayers.

        If that isn’t the case, surely they won’t mind if we make a few changes to US trade policy.

  • avatar
    IBx1

    Ordering fasteners in bulk from domestic sources is easy, it just costs a little more than getting the cheap stuff.

  • avatar
    Big Al from Oz

    It seems to me the Banana in Chief in the US is going to reduce the economy of the US if he continually pursues his flat earth policies (paradigms) on Trumponomics.

    I can see why he’s been bankrupt a few times.

    First how did he come up with 85% content for US made vehicles? I would think looking at populations, The US at most should have around 2/3s content.

    Trudeau stated recently the NAFTA talks are moving along nicely.

    I wouldn’t count on this current NAFTA deal ….. yet. I’d wait until the Mexican elections are over.

    Imagine if the new Mexican President does a Donnie Thump and declares the “new” NAFTA deal a no go. I think you’d see the bully Trump cry.

  • avatar
    Lou_BC

    Politically the USA has to soften its tone in relation to NAFTA due to needing a “win” pre-midterm elections and to create some stability with the potential trade war with China. As pointed out, Mexican elections are looming and the “odds on” favorites are less likely to be cooperative.

    • 0 avatar
      Big Al from Oz

      Lou,
      To top this NAFTA nonsense the Trump/US initiated trade tirade might impact the largest US vehicle exporter, BMW.

      BMW is currently considering off shoring it’s US SUV production. BMW figure if this trade sh!t keeps on going it will be forced to pay an additional 3/4 billion in tax alone, just BMW.

      If it decides to off shore it will be the end of US exports as it will be a 30 year plan. BMW is the US’es largest vehicle exporter.

      How fncking stupid is Trump and those who support his inane craziness?

      Here’s a sobering article for the Trump Flat Earthers to read. I also believe TTAC has a Trump’eque leaning, so they will most likely not present this article as it goes against some of the paradigms of TTAC. Read and research the inaccurate UK article on diesels! Wow!

      Like I’ve been stating for the US to fix up it’s export woes, especially in auto manufacturing and to be viable and competitive the US really needs to remove the existing extreme tariff (chicken tax), differing regulations that affect vehicle design, etc. That would be a great start for building what the customer wants, and it ain’t artifically supported F Series (not as good as Ram, but a nice truck).

      http://www.autonews.com/article/20180405/COPY01/304059980/trump-china-trade-war-germany-detroit

    • 0 avatar
      TW5

      Is it bad for Canada if the amount of NAFTA content increases? No.

      The bewildering spectacle has been watching Trudeau sell out middle class Canadians and Americans by working with Nieto to keep foreign content in the NAFTA trade area. It’s as if Trudeau thinks Canadian engineers can’t produce and manufacture vehicle components as well as the Chinese or Japanese. Therefore, Canadians are lucky just to have manufacturing jobs, logging jobs, and roughneck jobs according to Trudeau’s NAFTA behavior.

      When our economies had IP leverage, we didn’t really care if Asia siphoned some of our manufacturing base, but those days are long gone. We are now deciding whether we want to exist as natural resource colonies for the world’s factory countries or whether we want to rebuild our manufacturing bases. The “knowledge economy” has already been undermined by IP theft and WTO malfeasance.

      To be fair to the WTO, why would they care, when the most successful companies in the developed world are tech companies that specialize in stealing all of our personal data and IP so they can create AI that will put all of us out of work? As far as the world is concerned, we are just fattened sheep headed to the shearing table and then to the slaughter house.

      This must end.

      • 0 avatar
        Arthur Dailey

        Isn’t it ironic that ‘Communist’ China through its policies may create the exact economic end game that Marx predicted? Or as Lenin famously said; “The Capitalists will sell us the rope with which we will hang them.”

        • 0 avatar
          Big Al from Oz

          Arthur,
          The US isn’t very capitalistic in manufacturing. Nor is many countries.

          So, don’t worry about Marx’s writings, they were all theoretical. Political science is far from exact.

      • 0 avatar

        Canada does have a booming animation and special effects industry. In fact in the last five years 50% of all special effect jobs lost in Hollywood went to Canada. Canada has basically taken over the special effects industry. Toronto and London are the new entertainment centers of the world. American has lost its ability to entertain the world.

        Thanks NAFTA…….

      • 0 avatar

        Canada does have a booming animation and special effects industry. In fact in the last five years 50% of all special effect jobs lost in Hollywood went to Canada. Canada has basically taken over the special effects industry. Toronto and London are the new entertainment centers of the world. American has lost its ability to entertain the world.

        Thanks NAFTA…….

  • avatar
    Jeff S

    @Big Al–I believe this is one of Trump’s negotiating tactics, a scorched Earth which is suppose to bring the other party to the table to negotiate. Don’t give in and play hardball. Maybe this is how Trump conducts his own business deals but I doubt it will work with other countries. China has already publicly stated that it will put 25% tariffs on US agricultural products such as soybeans and other products. The US stock market is taking a dive and other countries will retaliate with their own tariffs. There are other ways to get concessions on trade and tariffs.

    • 0 avatar
      TW5

      We will sell our soybeans elsewhere for roughly the same price, along with our coal and whatever else. The Chinese don’t have another market where they can dump a half-million $250 Walmart couches, nor do they have another market to dump an extra 20M $1,000 smart phones each year.

      We hold all the cards. We don’t need to retaliate.

      If the Chinese don’t like our leverage, they can abandon their civil aviation program, which is fueled by corporate espionage, and they can buy a few hundred Boeing 787’s, and a hundred thousand Catepillar machines, and they can let in US built cars and transportation equipment.

      Maybe we will stop caring where our lawnmowers and couches come from.

      • 0 avatar
        Big Al from Oz

        TW5,
        There is no market for the US soyabeans, Boeings, etc. What you are stating is the US will starting dumping? These markets are already catered for. As I stated the only way the US can increase exports of what the Chinese don’t buy is to dump.

        I lied there is one market. China.

        Wasn’t it you who berated the Chinese for dumping steel and aluminium?

        So, it’s okay for the US to dump?

        Now I understand your logic. It’s not fair when someone else out competes the US, but the US can do what the fnck it likes.

        What a sad set of paradigms you have mate.

      • 0 avatar
        tekdemon

        China consumes the majority of the world’s soybeans, where are you supposed to go sell all the excess?!

        And while in the short term China would be unhappy with less exports to the US in the long run they’re actually happier if BMW and Mercedes end up moving more plants to China. Exports to the USA are only 4% of Chinese GDP so even a 25% tariff won’t do more than a fraction of a percent of damage.

        Also, smartphones are exempt from the tariff anyways since even Trump realized it’s mostly just hurt Apple and Google and companies from allied nations like Samsung

        • 0 avatar
          TW5

          @tekdemon

          Total consumption is not going to change, unless China creates an artificial shortage and prices soar. That’s not what you do if you’re a communist regime trying to convince your subjects that they don’t need self-determination.

          Chinese net exports to the United States are roughly 4%-5% of GDP. If you understand basic macro, you know net exports to the US is a majority of China’s GDP growth.

          They have a smart way to fix their lack of trade leverage and a dumb way. They can retaliate against the US, which will fail miserably, or they can stop stealing intellectual property and start ordering US durable goods and services en masse for use in their own domestic economy. If they employ imports effectively in domestic production, they will have leverage.

          @ Big Al from Oz

          If the world is not dependent on the US trade deficit and US quantitative easing, why are you whining? If China has an absolute competitive advantage, let them exploit it.

          The US complains because we don’t like having to flex on people. They should know we are not to be trifled with, but some skulls are thicker than others, and they’ve become emboldened by US public officials selling out our country.

          • 0 avatar
            Big Al from Oz

            TW5,
            I really believe you need to learn how the world operates and the strength and weaknesses of global politics/trade.

            The US has the standard of living it does because of how it trades internally and externally. You seem to not understand the external side of the business.

            If China stops or reduces any US product entering the US needs to find a market for the production capacity of these products. The rest of the world is already catered for in these products the Chinese don’t want.

            The same goes for China regarding imports and exports.

            So, where will the US get the Chinese imports it stops? Another country it hasn’t screwed over. The same goes for the Chinese.

            Now, your mate Trump is creating instability among the US’es closest Allies. The EU, Korea, Japan, Australia even Canada, etc. This does not bode well for the longer term security and economics of the US.

            Here’s a senario, the US and China have their spate, the outcome is the trade sanctions are in place. Who will be affected the most?

            First look at the Chinese position. The EU buys as much as the US from China and are in a far better political position with China as well.

            The modern SE Asian economies, ie, Japan, Korea, Singapore, Australia, NZ, etc buy as much from the Chinese or even more than the US. And we have a far closer trading relationship with the Chinese due to our proximity in the region and are in a better politcal position with the Chinese.

            Africa, Sth America combined would buy a huge amount of Chinese imports.

            Now if the trade war is only between the US and China both these countries lose out the most and they will source whatever they need from other countries.

            Now, the rest of the world is maintaining it’s “free” trade as it currently stands.

            Where is the US and China going to sell their exports?

            So, what the US exports, ie, BMW, Mercedes Benz to China become too expensive for China to buy where are the workers in Spartanville going to work? Then the flow on effects?

            The same goes for pork and soyabeans. Who is going to buy US excess pork and soyabeans? Because the gap in the market for the products created by the US and China will need to be filled.

            http://www.news.com.au/finance/economy/world-economy/australia-could-be-a-winner-in-chinaus-trade-battle/news-story/86b8909a7e1fb86fb2ddc54d85b06532

            https://www.npr.org/sections/thetwo-way/2018/04/03/599081151/who-wins-a-u-s-china-trade-war-maybe-australia

            China buy lots of US metalurgical coal, Australia mines lots of this stuff, so who will supply the Chinese? Most any agricultural product the Chinese will source from Australia.

            I think you’d better look really close at the ramifications of Trump’s action. I’m not stating nothing should happen, but the path Trump is taking will make the US like one of his previous bankrupt companies.

          • 0 avatar
            Big Al from Oz

            TW5,
            The US is a great “company”, but the current person at the helm is a fncking joke. You see this in industry, the wrong person steering the ship.

            The US needs to restructure and change course. The Mafialike thug standover and bullying by Trump does not bode well for the US brand.

            Brand names mean a lot, this is what America once had a great brand name.

          • 0 avatar
            Big Al from Oz

            TW5,
            Sorry, Spartanburg.

          • 0 avatar
            Donald Brady

            Canada, Mexico are not arguing for higher content.  They argue for higher imported content (China and Asia). It’s a joke, and ridiculousness, Canada and Mexico are arguing for more Chinese imports. The reason is simple, more imported material content is because their trade economies exploit NAFTA loophole that allows parts to be shipped into Canada, Mexico, assembled, and shipped into the U.S. market without duty. Large American, Multi-national corps don’t want anything to change, fact! People seem to believe we still live in a supply/demand economy, not…it is a controlled market to exploit who will pay what. My 2 cents…

          • 0 avatar
            TW5

            @ Big Al from Oz

            China runs deficits with Japan, South Korea, Taiwan, Germany, etc. Furthermore, demand for fungible commodities and natural resources does not change fundamentally, if various countries stop trading with one another. Trade for finished goods does change, particularly if the finished goods are manufactured to meet the demands of a specific market that will no longer import.

            China is not going to find another host from whom it can siphon $400B-$500B in trade surplus. Everyone knows it. Everyone also knows, we are merely trying to make the Chinese buy American goods/services or at least invest in their own economy. People who pretend otherwise are part of the problem. Don’t be the problem.

            This isn’t the George W Bush administration. If someone sells user data to foreign governments, or acts as a media foreign agent without registering under FARA, or traffics people across borders, or gets caught selling American manufacturing jobs so a corp can import bunk Takata airbags, Kobe slag, or lead-paint Chinese toys, they might end up behind bars for the rest of their lives. We’re not going to look the other way anymore and say “illegal back channeling is just part of politics”.

            Party’s over. Time for you to retrain your brain.

          • 0 avatar
            Big Al from Oz

            TW5,
            The Chinese are no different than any other country in trade. So what want is no different than what the Chinese or Australians want.

            The only way to be successful is to become competitive.

            I don’t know why the US is using China as a competitor with manufacturing. So, next the US will challenge Bangledesh over T shirt manufacture?

            As for your view on trade. You are wrong, all wrong.

            Demand will drop as the US and Chinese take a hit in the cost of living. You will buy less and have less.

            The Chinese will lose out less than the US here as the Chinese will still trade with everyone else as it does now, but not the US.

            US surplus production needs to be sold. But, to whom. You see most everyone has trade agreement that will stop US goods having precedence over their goods.

            Australia has a FTA with China, so Australia is a prime source of supply to China.

            It think you better realise the US is powerful, but the amount of power you think it has is not as much as is needed.

            The US needs to be where it was 40 years ago and wield its power, like it used to.

          • 0 avatar
            Big Al from Oz

            TW5,
            I think what you don’t understand is what the US doesn’t import from China will need to be imported from another country. Most likely Indonesia, Thailand, Vietnam, India, etc at a greater expense.

            Or, if it’s procured locally within NAFTA at greater expense again.

            The Chinese are in the same boat.

            The likely outcome is the US will still import the product, still increasing your trade imbalance, reducing the tax take, again increasing your trade imbalance via borrowings.

            The US needs a way to become competitive.

    • 0 avatar
      Big Al from Oz

      Jeff,
      Sorry I didn’t reply earlier.

      The reality is the trade that the US and China lose from each other will not move within the respective countries. They both will need to import, so what has been gained other than increased costs to those in the US and China?

      You will have cheap pork from the fallout in soyabean prices, until the soyabean farmers go broke. Cheap pork will affect other livestock industries, like beef. But, the most probable market China will not buy US beef. Other markets are already catered for in livestock production.

      The same will happen in the auto industry. Jobs will be lost because the Chinese will not buy US car imports and believe it or not BMW and Mercedes Benz are already toying with the idea of moving their massive SUV production from the US back to Germany.

      Another aspect it seems many Americans focus on is manufacturing. 80% of the US economy is service based. This leave the last 20% for agriculture, mining, fishing and manufacturing.

      Another issue many in the US believe “others” have stolen their jobs, but all nations around the world have had the same reduction in manufacturing jobs. So, where will the US get these phantom “jobs” from?

      Back to this NAFTA deal. Trump will need to make concessions. The new NAFTA deal might end up with the US in a worse position as Trump has created too many issues that need resolution.

      Trump has this “winner takes all” thug approach to dealing with other nations, when in fact we are competitors, but we are also customers of the US. Trump can’t separate the two, one impacts the other.

      Dealing between nations (friendly and Allies) is very enterprise based, so collaboration is needed. Not standover tactics as if we are dealing with thugs like the Russians or some othere developing nation.

  • avatar
    Jeff S

    TW5–I doubt most people know that many of the lawn mower engines are now made in China. I bought a rear engine Troy Built riding mower 2 years ago and found out that it has a Chinese made engine. It does say made in the USA which it was assembled in the USA with various Globally made parts.

  • avatar

    Everything is a hodgepodge. Maybe #45 is thinking of the 60’s, where the seats were made in Kenosha, ball bearings from Camden, and the Pontiacs made in Pontiac.

    Everything is a hodgepodge. My Caddy has as much Bosch as my BMW did. The wheels are stamped “Made in China”. There are other “made in china” labels to be found on the car. The OE oil filter is a “product of poland”. End Links came in a box (OE, again) stamped “Made in Korea”. Good to know I’ve some Daewoo going, too.

    I was looking at a German (?) car recently. Hecho in South Carolina. Likewise, my VW was made in Mexico.

    It’s global…and Oldsmobile is gone for good.

    This will play to the know-nothing base of #45 and sounds good on TV to that group. A child, breaking expensive toys he has no interest in reading the instruction manual for…..

  • avatar
    Jeff S

    @Big Al–I do agree with Trump that trade with China is lopsided. I think his approach is extreme and will lead to retaliation which benefits no one. China has become the Number 1 trade partner with South and Central American countries. South American countries such as Brazil and Argentina already have a global agribusiness so China might be hurt short term by higher tariffs on soybeans and pork but long term they can import more of these products from South American countries. As for NAFTA there should be some renegotiating of the agreement but it is beneficial for the USA to have NAFTA. If anything we should make stronger trade alliances with Central and South America. Trump is worried about the mass immigration from Mexico and Central America which could become less if these countries had more trade with the USA. More trade means more jobs for not just the US but for these countries and more economic prosperity will bring more demands for freedoms. Things will never be perfect but it seems that the US needs to first focus on better trade with the Americas (Canada, Mexico, Central America, and South America).

    • 0 avatar
      Big Al from Oz

      Jeff,
      Use the reply button at the base of each comment submission.

      Well China will eventually end up like the US. That is it is trying to corner most global trade and overdo it.

      You see many are angry with China, but the US spent decades “buying” trade sometimes at a loss. Who’s at fault? The US didn’t create the current global system out of goodness. The US used to be dominant, almost totally dominant.

      As I’ve stated the US is becoming more like many other trading nations and is learning how to trade on a more level playing field.

      The US will change as TW5 stated, but not as he thinks. The guy is very insecure.

      The Chinese play by much longer term plans than the US and West with our election cycles.

  • avatar

    All of this should have been done 20 years ago. Just save the US industries that are in trouble now. One thing that can be done is stop the outsourcing of Hollywood film production and special effects to Toronto and Montreal. For the last 5 years Canadian and English firms have won the special effects Oscar.

    NAFTA is now forcing America to give up its entertainment industry. A nation that gives up one of its top industries has no self respect.

    • 0 avatar
      Big Al from Oz

      akear,
      There are no US industries in trouble. Name them?

      • 0 avatar
        Wheatridger

        Well, there’s newspapers…

        The case of Canadian TV & movie production is interesting and runs counter to the usual Rust Belt precedents. This time, the business is moving towards a high-tax, big-government, First World market – specifically to Vancouver, probably the most expensive city in Canada. What is it about Canada that they like, the weather? Or maybe it’s the social safety net that backs up the uncertain careers of entrepreneurs and free-lancers? I don’t know, but I’d like to.

        • 0 avatar
          Scoutdude

          No they moved to Vancouver because it is much cheaper than any other city on the west coast. They get massive subsidies and lots of help from the Candaian film board and local gov’ts. They’ll bend over backwards to close off a road or something like with minimal notice and fuss. Meanwhile in the US you’ll need an expensive permit that takes months and much heartache to get if you are trying to film in SoCal or Seattle.

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