Automaker groups warn US tariffs will undermine new NAFTA deal
WASHINGTON: US automakers and parts suppliers on Thursday warned that President Donald Trump’s steel and aluminium tariffs and threatened car tariffs would undermine the benefits of the new deal to modernise the North American Free Trade Agreement, causing widespread job losses.
At a wide-ranging hearing before the US International Trade Commission, labour representatives said the new Usmexico-canada Agreement (USMCA) fails to include adequate enforcement of labour standards, while Southeastern US fruit and vegetable growers said it leaves them vulnerable to subsidised Mexican competition.
The testimony will feed into a study by the commission on the economic impact of the trade deal reached on September 30, which could heavily influence support for it in the US Congress. A vote on the pact is not expected until the spring of 2019, following a lengthy consultation process. Several automotive trade groups said side letters to the USMCA deal that allow Canada and Mexico duty-free auto import quotas in the event that Trump imposes car tariffs was an indication that such a move seemed inevitable.
The Trump administration is considering recommendations from the Commerce Department on whether to impose tariffs on national security grounds under Section 232 of a Cold War-era trade law.
No decisions have been made, but President Donald Trump has frequently threatened to impose 25 per cent tariffs on autos and parts to pressure the European Union and Japan to make trade concessions.
“If implemented, increased auto tariffs would not only undermine the potential success of the USMCA, they would also pose a material threat to the economy and may result in the loss of as many as 700,000 jobs across the US,” said Jennifer Thomas, vice-president of government affairs for the Alliance of Automobile Manufacturers.
The groups also said the failure of the new Us-mexico-canada Agreement (USMCA) to lift steel and aluminium tariffs have cost the industry billions of dollars and trade turmoil in general has paralysed investment decisions.
“The current state of play on trade has placed our industry in turmoil,” said Ann Wilson, senior vice-president of government affairs at the Motor and Equipment Manufacturers Association. “In the last year our members have faced Section 232 steel and aluminium tariffs, other Section 232 tariffs proposed, and Section 301 tariffs on goods from China.”
There also was a divergence of views among domestic and foreign automakers on the overall benefits of the USMCA agreement, which requires autos to have 75 per cent regional content and at least 40 per cent from the United States or Canada.
John Bozzella, president of the Association of Global Automakers which represents foreign brand automakers with US plants, said he was concerned that the “many layered” content requirements would hurt automakers’ competitiveness by requiring “unnecessary” supply chain shifts and investment in compliance.
Matt Blunt, president of the American Automotive Policy Council, which represents Detroit automakers General Motors, Ford and Fiat Chrysler, described the trade deal as “workable” for these companies which have larger US manufacturing footprints than their competitors.
He said it would not require massive manufacturing and supply chain changes immediately but over time, automakers would need to consider changes in where they build cars and major components.
A similar divergence came from agriculture groups, where grain farmers and shippers said it was a “significant advancement” that expands market access but seasonal produce groups said it fails to address Mexican subsidies that are driving Southeastern growers out of business.