Carmakers Focus on NAFTA Local Content Rules During Pence Meeting

On Monday U.S. carmakers repeated their concerns to Vice President Mike Pence about how proposed changes to the North American Free Trade Agreement are likely to impact profits and jobs.

They are especially worried about the Trump administration’s push to raise NAFTA’s local content requirements for duty-free import to the U.S. to 85% from the current 62.5%. The administration also wants the power to slap tariffs on any imported vehicle if more than 50% of its content originated outside the U.S.

Canada and Mexico have flatly rejected both proposals. Carmakers also object to such requirements, which they say would deeply disrupt their supply chains, raise vehicle prices and eventually drive more jobs out of the U.S.

Manufacturers do agree that NAFTA, which turns 24 years old in January, needs a tune-up. They favor changes that would curb currency manipulation and ensure that foreign markets accept products made to U.S. performance standards.

But carmakers say the global supply chains they have developed, which includes a heavy reliance on low-cost labor in Mexico, are critical to their ability to compete against other global manufacturers.​​​​