Study: Border Tax, NAFTA Exit Would Hurt U.S.

The U.S. auto industry would lose at least 31,000 manufacturing jobs and 450,000 units of annual sales if the U.S. imposes 35% tariffs on cars from Mexico, as President-elect Donald Trump has vowed to do.

So says an analysis by the Center for Automotive Research in Ann Arbor, Mich. The report was funded by the Alliance of Automobile Manufacturers.

The analysis describes the North American Free Trade Agreement as flawed but says it has been a net positive contributor to the U.S. auto industry. Withdrawing from the deal or making NAFTA more restrictive would increase product costs and make U.S. carmakers and their suppliers less competitive, according to CAR.

The center says meddling with NAFTA could hurt U.S.-based parts suppliers because they supply about 40% of the content of cars made in Mexico—three times the proportion of Mexican-made parts used in vehicles assembled in the U.S.

CAR opines that making small-car production in Mexico less attractive isn’t likely to coax carmakers to make such vehicles in the U.S. It estimates manufacturers would need as much as $6.5 billion in new capacity to enable the shift. More likely, CAR says, is that U.S. carmakers would simply source such vehicle from other low-cost regions outside the NAFTA area.