New York - Donald Trump’s Twitter-fueled bid to crimp free trade in the
auto industry began with a warning to Detroit’s big 3 about building
factories south of the border. Later, he fired off threats to German
automakers—specifically BMW, which is far along in completing a plant in
San Luis Potosi, Mexico, that’s set to churn out 150 000 cars a year.
But as the Republican president-elect takes office this week—and
potentially makes good on a promised 35 percent tariff on vehicle
imports—some sizable auto industry targets for his internet ire remain.
Load up the 140-character word cannon—here’s where Trump may be aiming
next.
Blame Canada
The heart of the US auto industry may be in Detroit, but much of its
muscle lies just across the river in Windsor, Ontario. That’s where almost 6 000
Fiat-Chrysler workers bolt together the Chrysler Pacifica minivan and Ram
pickups.
All told, Ontario assembly plants have about 27 000 auto workers,
including 5 600 people assembling Chevrolet SUVs and the sporty Camaro at two
General Motors plants. There’s also some 7 000 folks at two Toyota
installations, stamping out Lexus RX crossovers, Corolla sedans, and Rav4
trucks.
That’s almost one assembly worker for every five in the US, according to
labor data culled from the companies and the Alliance of Automobile
Manufacturers. When it comes to vehicles, the US trade gap with Canada is
actually larger than its imbalance with Mexico—$28.6 billion in the first 11
months of 2016, versus $18.3 billion on the southern border.
Bits and pieces
A car itself, however, is just one product in a sprawling supply chain.
The North American Free Trade Agreement more than anything else freed up the
movement of parts. Anti-lock brake systems from Toluca, Mexico, and
transmissions from Guelph, Ontario, might come together in San Antonio to be
riveted onto a Toyota Tacoma, or an Accord rolling out of the massive Honda
plant in Marysville, Ohio.
Each part on a North American vehicle–be it in Canada, Mexico, or the
US—may have crossed borders up to eight times, according to a recent analysis
from the Center for Automotive Research. Of course, names of suppliers such
as Robert Bosch and Linamar Corp. don’t have as much heft in a Twitter
tirade as Ford or GM, but if Trump is spending long nights in Mar-a-Lago
poring through Federal Trade Commission spreadsheets, he won’t like what he
sees (Trump’s representatives didn’t return requests for comment). The U.S.
trade balance with Mexico for auto parts is about one-third larger than that
for vehicles themselves.
Pivot to asia
Finally, Trump could take a page from the Ronald Reagan playbook and go
after Asia. On a list of the most-popular US cars that aren’t made in the US,
eight of the top 10 come from Japan-based companies. Subaru’s Forester tops the
list, followed by Nissan’s Rogue .
On vehicles alone, the US trade balance with Japan is almost twice as
large as its gap with Mexico. South Korea, the home of Hyundai and Kia, also
sends a steady and fairly one-way stream of cars to America.
Read also: Trump threatens German carmakers with 35% import duty
A widespread 35 percent tariff on imported vehicles would have a chilling
effect on all three of these regions. Under such a penalty, the entire US auto
industry might look a lot like the current market for pickups, which has faced
a 25 percent tariff on imports since the early 1960s. When it comes to trucks,
American consumers have far fewer choices than they do for something like a
sedan.
The so-called chicken tax (don’t ask) has indeed pushed
some foreign automakers to build plants in the US. Toyota makes
Tacomas in Texas, for example, while Nissan Titans come out of Canton and Honda
bangs together its Ridgeline in Lincoln. But some of the biggest names in the
business, including Hyundai and Volkswagen, stay out of the segment entirely.
Mercedes is adding a pickup truck to its product line this year, but ironically,
it has no plans to sell it in America.
All told, if the US were to abolish NAFTA, it would eventually welcome
some 22 000 new production jobs, according to the Center for Automotive
Research. The bad news though is that the country would also lose 37 000 jobs,
as vehicle prices creep up and choices and demand tick down.
“That’s a very conservative estimate,” said Kristin Dziczek, director of
the Industry, Labor & Economics Group at the Center for Automotive
Research. “I don’t know many people who can afford a 100 percent
Made-in-the-USA vehicle.”