Team Trump Eases Demands on NAFTA's Regional Auto Content

Matt Posky
by Matt Posky
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team trump eases demands on nafta s regional auto content

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.”

Matt Posky
Matt Posky

Consumer advocate tracking industry trends, regulation, and the bitter-sweet nature of modern automotive tech. Research focused and gut driven.

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  • Jeff S Jeff S on Apr 08, 2018

    @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).

    • Big Al from Oz Big Al from Oz on Apr 08, 2018

      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.

  • Akear Akear on Apr 08, 2018

    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.

    • See 2 previous
    • Scoutdude Scoutdude on Apr 08, 2018

      @Wheatridger 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.

  • Carsofchaos Bike lanes are in use what maybe 10 to 12 hours a day? The other periods of the day they aren't in use whatsoever. A bike can carry one person and a vehicle can carry multiple people. It's very simple math to figure out that a bike lane in no way shape or form will handle more people than cars will.The bigger issue is double parked delivery vehicles. They are often double parked and taking up lanes because there are cars parked on the curb. You combine that with a bike lane and pedestrians Crossing wherever they feel like it and it's a recipe for disaster. I think if we could just go back to two lanes of traffic things would flow much better. I started coming to the city in 2003 before a lot of these bike lanes were implemented and the traffic is definitely much worse now than it was back then. Sadly at this point I don't really think there is a solution but I can guarantee that congestion pricing will not fix this problem.
  • Charles When I lived in Los Angeles I saw a 9-5 a few times and instanly admired the sweeping low slug aerodynamic jet tech influenced lines and all that beautiful glass. The car was very different from what I expected from a Saab even though the 900 Turbo was nice. A casual lady friend had a Saab Sonnet, never drove or rode in it but nonetheless chilled my enthusiasm and I eventually forgot about Saabs. In the following years I have had seven Mercedes's, three or four Jaguars even two Daimlers both the 250 V-8 and the massive and powerful Majestic Major. Daily drivers of a brand new 300ZX 2+2 and Lincolns, plus a few diesel trucks. Having moved to my big farm in central New York, trucks and SUV's are the standard, even though I have a Mercedes S500 in one of my barns. Due to circumstances with my Ford Explorer and needing a second driver I found the 2006 9-5 locally. Very little surface rust, none undercarriage, original owner, garage kept, wife driver and all the original literature and a ton of paid receipts and history. The car just turned 200,000 miles and I love it. Feels new like I'm back in my Nissan 300ZX with a lot more European class and ready power with the awesome turbo. So fun to drive, the smooth power and torque is incredible! Great price paid to justify going through the car and giving her everything she needs, i.e., new tires, battery, all shocks, struts, control arms, timing chain and rust removable to come, plus more. The problem now is I want to restore it and likely put it in my concrete barn and only drive in good weather. As to the writer, Alex Dykes, I take great exception calling the 9-5 Saab "ugly," finding myself looking back at her beauty and uniqueness. Moreover, I get new looks from others not quite recognizing, like the days out west with my more expensive European cars. There are Saabs eclipsing 300K rourinely and one at a million miles and I believe one car with 500K on the original engine. So clearly, this is a keeper, in love already with my SportCombi. I want to be in that elite club.
  • Marky S. I own the same C.C. XSE Hybrid AWD as in this article, but in Barcelona Red with the black roof. I love my car for its size, packaging, and the fact that it offers both AWD and Hybrid technology together. Visibility is impressive, as is its small turning circle. I consider the C.C. more of a "station wagon" by proportion, rather than an “SUV.” It is fun to drive, with zippy response and perky pick-up. It is a pleasant car to drive and ride in. It is not trying to be a “Butch Off-Roader”, or a cosseting “Luxury Cruiser.” Those are not its goals or purpose. The Corolla Cross XSE Hybrid AWD is a wonderful All-Purpose Car (O.K. – “SUV” if you must hear me say it!) with a combination of all the features it has at a reasonable price.
  • Ernesto Perez There's a line in the movie Armageddon where Bruce Willis says " is this the best idea NASA came up with?". Don't quote me. I'm asking is this the best idea NY came up with? What's next? Charging pedestrians to walk in certain parts of the city? Every year the price for everything gets more expensive and most of the services we pay for gets worse. Obviously more money is not the solution. What we need are better ideas, strategies and inventions. You want to charge drivers in the city - then put tolls on the free bridges like the Brooklyn, Manhattan and Williamsburg bridges. There's always a better way or product. It's just the idiots on top think they know best.
  • Carsofchaos The bike lanes aren't even close to carrying "more than the car lanes replaced". You clearly don't drive in Midtown Manhattan on a daily like I do.