Study warns new NAFTA would cut into auto sales

standard and would wind up paying a tariff.

“Tariffs (would) add at minimum a US$2.1-billion to US$3.8billion tax on U.S. consumers,” said the study, released Thursday.

“The tariffs would add between US$470 and US$2,200 to the cost of these particular vehicles ... (and) the result would be an estimated loss of 60,000 to 150,000 annual U.S. light vehicle sales.”

The group behind the research is funded by the auto industry, governments, unions and other organizations. says, the auto sector faces a longterm terminal decline.

He’s unsure the new NAFTA rules will change that.

He said it’s a no-brainer for companies trying to decide whether to adjust practices to comply with the new rules. He figures compliance with NAFTA might add five per cent to the cost of a vehicle, versus the tariff of 2.5 per cent for light vehicles sold in the U.S.

“If I was a shareholder at (auto-parts-maker) Magna, or GM, I know what I would be telling management to do — which is, instead of tripling wage costs (in Mexico), pay the tariff,” Rubin said.

“Ultimately GM and Magna are going to do what’s in the best interest of their shareholders. And right now the best interest would be keep the production in Mexico, pay the low wage rate and pay the 2.5 per cent tariff.“

As long as the tariff remains low, Rubin added that the new NAFTA will be “a paper tiger.”

However, it would be “a totally different ball game,” if the countries raise their tariff, he says, arguing that it would make paying the higher cost of compliance the better alternative and steer production back to the U.S. and Canada.

“It would be a total gamechanger.”

But under the current proposal, with no change to the tariff level, Rubin sees the new NAFTA as producing a 2.5 per cent added tax on cars and no improvement in the lives of Canadian and American workers — a scenario that “isn’t going to bring a single job back to the U.S.”