GM tweet slightly off course
President-elect Donald Trump put General Motors on notice for tariff-free imports of vehicles from Mexico, warning of heavy taxes if vehicles are not instead manufactured in the United States.
“General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border,” Trump tweeted Tuesday. “Make in U.S.A. or pay big border tax!”
Imposing hefty tariffs on foreign goods was a staple of Trump’s pro-manufacturing agenda. He suggested on day one of his campaign that if Ford chose to open a factory in Mexico and then tried to sell those vehicles in the United States, he would tell Ford’s CEO that “we’re going to charge you a 35% tax.” In the same speech, he bemoaned Chevy’s slight presence in foreign countries, particularly in Japan.
We wanted to look at Trump’s most recent beef with Chevy.
The key to our review is that the president-elect singled out the Mexican-made model of the Chevy Cruze.
The Cruze made in Mexico is a hatchback that does not sell widely in the U.S. Chevy Cruze sedans are more popular in the U.S. — and they are produced in Ohio.
Trump has a point, however, that the Mexican Cruze has made its way to the U.S. free of taxes, based on provisions under the North American Free Trade Agreement.
General Motors: We make Cruzes in Ohio, too
General Motors, whose portfolio
includes Chevrolet, Cadillac, Buick and GMC, said in a brief statement that all Chevrolet Cruze sedans sold in the U.S. are built in the company’s assembly plant in Lordstown, Ohio.
In 2016, it sold 185,500 of this body type in the U.S.
But the company “builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S.,” the statement said.
Production of the hatchback model began in mid-2016, Patrick Morrissey, a General Motors spokesperson, said in an email.
Out of 29,000 hatchbacks made in Mexico in 2016 for global markets, 4,500 were sold in the U.S., Morrissey said.
Free trade provisions under international agreement
The North American Free Trade Agreement, effective since January 1994, lifted trade tariffs and restrictions among Canada, the U.S. and Mexico.
NAFTA has been praised for expanding and facilitating trade among the three countries, but Trump and labor unions from the U.S. have criticized the deal for outsourcing jobs and lowering wages.
Trump called it the “worst trade deal ever,” blaming it for the loss of manufacturing jobs.
But nonpartisan research said NAFTA has had a more subtle effect on the U.S. economy.
“NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters,” a 2015 Congressional Research Service report said. “The net overall effect of NAFTA on the U.S. economy appears to have been relatively modest, primarily because trade with Canada and Mexico accounts for a small percentage of U.S. GDP.”
NAFTA allows the tariffs-free import of autos, light trucks, engines and transmissions from Mexico as long as 62.5% of their value is from North America, the 2015 report said. The “rules of origin” requirement for other vehicles and automotive parts is 60%, according to the report.
The Chevy Cruze hatchback would be covered under NAFTA’s duty-free provision, experts told PolitiFact.
NAFTA allowed each participating country to specialize in different stages of production, said Caroline Freund, a senior fellow at the nonpartisan Peterson Institute for International Economics.
Parts can go back and forth in the production of a vehicle, so a car that’s imported from Mexico can actually include components from companies in the U.S., Freund said.