Trump auto tariffs strike at heart of North American trade

Workers assemble physics car keys astatine a manufacturing works successful Mexico. Photo: ULISES RUIZ / AFP/File
Source: AFP

US President Donald Trump's tariffs connected imported cars onslaught astatine the bosom of a North American escaped commercialized agreement, threatening to disrupt proviso chains and rise prices, experts say.

Thanks to the United States-Mexico-Canada Agreement that came into effect successful 2020 -- and its predecessor NAFTA -- the portion became an assembly enactment spanning the 3 countries.

"We've been making this proviso concatenation much blase for 30 years," said Juan Francisco Torres Landa, a spouse astatine concern consulting steadfast Hogan Lovells successful Mexico.

"There is determination integration based connected inputs, earthy materials, and processes successful each 3 countries," helium told AFP.

Trump said the tariffs were successful effect to America's commercialized partners "taking our jobs, taking our wealth," but the duties committedness to beryllium a headache owed to the heavy integration of accumulation chains.

Here are immoderate of the expected impacts of the tariffs, according to experts.

Snarled proviso chains

During the assembly of a car oregon truck, parts often transverse the borders of the 3 countries aggregate times earlier the conveyance is finished.

Extensive proviso chains person been built involving hundreds of suppliers from antithetic countries.

A car cardinal unsocial tin person much than 50 components from 22 antithetic suppliers successful Asia, North America and Europe.

The White House said vehicles assembled successful Mexico and Canada could suffice for little tariffs nether the USMCA woody depending connected however galore of their components are made successful the United States.

"Given the complexity of determination proviso chains -- wherever parts often transverse borders aggregate times -- verifying compliance whitethorn necessitate time-consuming adjustments, expanding operational costs," the governmental hazard consultancy steadfast EMPRA told clients.

"US automakers with accumulation successful Mexico could look rising costs and logistical complications, which whitethorn pb immoderate to reassess their manufacturing strategies," it added.

Growth constrained

Mexico's economy is considered 1 of the astir susceptible to Trump's planned tariffs owed to its adjacent commercialized relations with the United States.

The Latin American federation is location to galore foreign-owned conveyance plants operated by companies including Ford, General Motors, BMW, Volkswagen and Toyota.

More than 80 percent of Mexican exports spell to the United States, including astir 3 cardinal vehicles a year.

The car tariff announcement comes astatine a hard clip for Mexico's economy, the 2nd largest successful Latin America.

Experts surveyed monthly by the Mexican cardinal slope expect economical maturation of lone 0.81 percent successful 2025, worse than the 1.0 percent they predicted successful February.

The commercialized tensions "generate uncertainty and impact backstage concern and accumulation decisions successful cardinal export sectors," Geronimo Ugarte, main economist astatine the fiscal steadfast Valmex, told AFP.

Trade woody successful limbo

Mexico and Canada see Trump's tariffs to beryllium successful usurpation of the USMCA.

Mexican President Claudia Sheinbaum said Thursday "there should beryllium nary tariffs" betwixt Mexico, the United States and Canada arsenic "that is the essence of the commercialized agreement."

Washington's announcements person near the statement successful limbo.

"We request to analyse whether... for Trump, the USMCA should beryllium replaced, substituted oregon simply extinguished by starvation," Torres Landa said.

Although a reappraisal of the pact is owed by 2026, Jesus Carrillo, an adept astatine the Mexican Institute for Competitiveness, believes commercialized argumentation "is being negotiated straight and progressively betwixt governments."

"We're moving from having a pact to having deals," Carrillo said.

He believes that "the USMCA volition stay successful effect, but with Band-Aids."

More costly cars

Analysts and US trading partners pass that the tariffs volition rise prices for American consumers.

Philippe Waechter, main economist astatine Ostrum Asset Management successful Paris, thinks the terms of a car could summation by $3,000.

There is simply a hazard that consumers volition bargain less caller cars, according to the British-based consultancy steadfast Capital Economics.

"Assuming that home producers respond by substantially expanding their ain prices, (the tariffs) could marque caller vehicles thing of a luxury item," it said.

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Source: AFP