The U.S. auto industry has seen one major headache go away. However, that doesn’t mean industry jitters have ceased.
The Trump administration announced Sept. 30 that Canada will be part of a new trade agreement with the U.S. and Mexico. That will, essentially, preserve an automotive supply chain extending across the three countries that formed because of the North American Free Trade Agreement.
“Aside from avoiding disaster, there really wasn’t much to gain or lose” in the new agreement, said Kristin Dziczek, a vice president of the Center for Automotive Research (CAR; Ann Arbor, MI) in an e-mail interview. “There will be some movement of supply chains to North American on the margins.”
NAFTA will get new “branding.” It’s now going to be called the U.S.-Mexico-Canada Agreement, or USMCA.
“USMCA. That’ll be the name, I guess, that, 99 percent of the time, we’ll be hearing: USMCA,” President Donald Trump said Oct. 1, according to a White House transcript. “It has a good ring to it.”
Of course, Trump isn’t neutral. He criticized NAFTA when he ran for office.
“I have long contended that NAFTA was perhaps the worst trade deal ever made,” he said in discussing the new deal. “To me, it’s the most important word in trade because we’ve been treated so unfairly by so many nations all over the world. And we’re changing that.”
One Fight Down…
CAR’s Dziczek, whose portfolio covers economics, trade and labor, said the changes under USMCA won’t all be favorable.
“Production costs will go up, and sales will likely go down---all other things equal,” Dziczek said.
Trade publication Automotive News, in a recent editorial, sounded more relieved than celebratory.
“This rebadged North American Free Trade Agreement is good for the industry not because its terms are favorable, but because the fight is over,” according to the editorial.
This fight may be over. There are other trade conflicts. Trump has led the U.S. into a trade war with China. There are also trade tensions with the European Union and other regions.
“Yes, there are still jitters about China, the possibility of Section 232 tariffs being imposed on Japan, EU, U.K. once it leaves the EU, and South Korea,” Dziczek said.