Feb. 28, 2018—Auto manufacturers are closely monitoring how the Trump administration tries to renegotiate the North American Free Trade Agreement, as the latest round of talks takes place in Mexico City this week.
While NAFTA effects several business sectors, it effects few more than the car industry, as noted in a National Public Radio report. Automakers say that altering the agreement could increase their costs and make them less competitive.
With a potential impact on 450 million people in the U.S., Canada, and Mexico, NAFTA effects the world’s largest free trade area, with approximately $20 trillion in economic output. The three countries comprise roughly a quarter of the trade in passenger vehicles worldwide, according to the Center for Automotive Research.
The Trump administration seeks to change the equation for what qualifies a vehicle to be free from taxes and tariffs under NAFTA. Under current rules, 62.5 percent of a vehicle must be made in Mexico, the U.S., or Canada to qualify. Trump wants that number to increase to 85 percent. Additionally, the U.S. president’s administration wants at least 50 percent of the vehicle to be made in the U.S.
Fiat Chrysler CEO Sergio Marchionne was blunt recently with regard to his assessment of possible changes to NAFTA, saying “I don’t think we need to go to the 85 [percent content] number to try and address what President Trump’s concerns are. I’m hopeful that I think we’ll see a more rational number going forward.”