Analysis: U.S.-Mexico Trade Deal Won’t Affect Most Cars

The tentative free-trade pact announced yesterday between the U.S. and Mexico would impact only about 30% of the 2.4 million vehicles the U.S. imports from Mexico annually, says Bloomberg News.

Even those vehicles would pay only the current U.S. import tax of 2.5% for cars and 25% for trucks, according to Bloomberg’s analysis.

The proposed agreement would raise the U.S.-Mexico content requirement for vehicles to 75% from the current 62.5%. Bloomberg estimates the increase would affect only three models currently imported from Mexico: the Audi SQ5 crossover vehicle, Fiat 500 minicar and Nissan Versa small sedan.

The deal also requires that 40%-45% of content must originate at factories that pay workers more than $16 per hour—roughly double the average wage for auto workers in Mexico. It isn’t clear whether that requirement would apply specifically to workers in North America or to workers anywhere in the world.

Bloomberg points out that most non-regional content currently comes from high-paying plants in Germany, Japan and South Korea. It estimates the new wage rule would cover about 27% of vehicles shipped from Mexico to the U.S.

Canada, which wasn’t a party to yesterday’s tentative agreement, is expected to join the discussion today. Bloomberg predicts a similarly minor impact for the country, whose factories already pay auto workers well above the $16 hourly minimum.

Bloomberg figures the only Canadian-made vehicle that would be affected by the greater local content rule would be the Ford Flex crossover vehicle, a trio of Cadillac and Lincoln models and Honda’s two-door Civic small car and CR-V small crossover.