Donald Trump says he wants to see more vehicles made in the United States. It is a useful slogan and could have been a viable idea.
The problem is that there is no longer a car fact in America. And there has not been for years.
Since Canada and the United States signed the Auto Pact in 1965, car manufacturers have taken advantage of the comparative advantage in both countries to make the industry more competitive, the most efficient production and the most affordable vehicles.
Experts say that tariffs would effectively unravel those advantages almost immediately.
“It is the same Trump nonsense that is not backed by the paperwork that is going to hurt [the] The American automotive industry worse than it will damage Canada, “said Flavio Volpe, head of the Association of Automotive Parts Manufacturers (APMA).
A case study
Any vehicle manufactured in North America is manufactured through a complex network of interconnected supply chains that use raw materials and parts suppliers that cover the entire continent.
Consider the rear set of a car made in North America.
That graph was gathered by the APMA. He says that he is based on the real contracts of its members. The names of the companies were written to respect competitive confidentiality.
Each point represents a different company that provides the material or part required to complete the rear set.
To break the process even more, everything begins as raw material in a country, forms in one part in another, then moves again to assemble in a broader component, before finally assembled and finally sent to a client.
Rubber is processed in Monterrey, Mexico. It is formed in an Iowa connector. That piece fits the control set made in Brampton, Ontario. The control arm is together as part of the rear suspension set in Detroit. The rear set is sent to Windsor, Ontario, for the final assembly and is finally sold in California.
The new NAFTA
You could elaborate a similar chain for each individual part in any car.
The whole process is only feasible when those components can move through borders without rates.
That was a key component of the renegotiated Free Trade Agreement of North America in 2018. When it was announced, Trump announced the newly signed United States-México-Mexico Agreement as an advance for the US automotive industry.
“Once approved, this will be a new dawn for the US automotive industry and for American car,” Trump said in 2018.
And yet, when he announced his last save Tarifa, Trump’s proclamation essentially stated that his own commercial agreement was a failure.
“I am also informed that the agreements concluded before issuing 9888, such as reviews to the United States-Korea Free Trade Agreement and the United States-Canadá (USMCA) agreement, have not given enough positive results,” the administration wrote.
But undo the status quo will come with a huge cost.
“A car has not really been made in North America,” said Patrice Maltais of the Industry Association Global Australors Canada.
He says that the nature of the continent of the intricate supply chain cost billions of dollars and took decades to build.
“Basically, you must unravel many of those supply chains and put new ones, and that takes a long time and a lot of money is needed.”
He says that a new manufacturing plant could cost between $ 2 billion to $ 10 billion.
“That is just the plant, so you must look at all the supply chains of that plant.”
Even if automobile manufacturers really agreed to transfer production to the US.
Tariffs would erode the industry, experts say
Meanwhile, experts say the industry would be beaten by tariffs.
“You will feel almost immediately,” said Jan Griffiths, former US car executive and founder of the Detroit Gravitas Industry Association.
During a campaign stop on the 4th in Windsor, Ontario, liberal leader Mark Carney announced that if he is elected prime minister, a ‘strategic response fund’ of $ 2 billion will be created to help workers affected by tariffs imposed by the president of the United States, Donald Trump. The background would help create a totally Canadian network for the manufacture of car components.
Instead of trying to use tariffs to force the change that would cost everyone, he says that Trump should offer a viable path for Canada, Mexico and the United States.
“If it is about renegotiating USMCA, let’s do it, but let’s do it now and eliminate the uncertainty of the system. Entrepreneurs cannot handle this level of uncertainty,” he told CBC News.
But Griffiths says that the manufacturing base that once existed in the United States “is no longer here.” A long time ago it was replaced by one of the most efficient and profitable manufacturing processes in the world.
Even the threat of undoing that network has already shaken the markets, eroded trust and caused an almost unprecedented level of concern between one of the largest industries in the continent.
