Trade

Trump’s USMCA Will Impose Permanent Tariffs on Automakers

JM Ashby
Written by JM Ashby

Trump's fake replacement for the North American Free Trade Agreement (NAFTA), the so-called United States Mexico Canada Agreement or USMCA, does not make significant chances to the law and won't be noticeable to the vast majority of Americans, but one thing it does do is slightly raise content thresholds for vehicles produced in North America.

That may seem like a good thing -- producing more of the parts that go into cars and trucks here in North American rather than China, for example, is good, right?

You would think so, but the new language of the law does not raise the thresholds high enough for it to be worth moving production and, according to the Congressional Budget Office (CBO), American automakers can expect to pay up to $3 billion in tariffs as a result while employment in assembly declines.

WASHINGTON (Reuters) - U.S. President Donald Trump’s rewrite of North American trade rules will cost automakers nearly $3 billion more in tariffs over the next decade for cars and parts that will not meet higher regional content requirements over the next decade, the Congressional Budget Office (CBO) estimates. [...]

In April, the U.S. International Trade Commission (ITC) found that USMCA would modestly boost the U.S. economy, especially auto parts production over current conditions, but may curb vehicle assembly and limit consumer choice in cars.

Auto industry employment would rise by 30,000 jobs for parts and engine production, but U.S. vehicle assembly would decline.

Notably, the United Auto Workers (UAW) union has refused to endorse the USMCA, saying that it's "highly unlikely to bring factories back from Mexico."

It appear that this change in law will be a wash at best. I mean, creating 30,000 jobs over ten years while assembly declines by an equal amount or more is like a mouse farting on cotton. No one is going to notice.

The $3 billion figure is a slightly different story as that will become a baseline part of buying a car or truck in America under Trump's permanent tariffs. This cost will be added to Trump's permanent tariffs on foreign steel and aluminum which have already cost automakers billions.

A significant percentage of the cost of buying a new car or truck in America can literally be attributed directly to Trump. And that's one reason why your local dealerships have so many new-model cars they can't get rid of.

Maybe the Democratic candidate for president should run on the explicit fact that they could immediately lower the cost of cars after taking office by ending Trump's trade war.

  • gescove

    This seems like something House Democrats would oppose, especially with opposition from the UAW. I know Dems got a lot of the revisions they wanted, by why was Pelosi so eager to announce a deal? It gives Trump a win that could potentially help him in the industrial mid-West.

  • muselet

    Apologies if this comment appears twice. Disqus has decided not to play nice, and it’s not displaying my comments consistently.

    Everyone purchasing a new vehicle in the near future should be reminded—repeatedly and without subtlety—that the sticker price includes an $x thousand Trump Tax to cover the various tariffs and market distortions this administration is responsible for.

    I doubt this would change anyone’s buying habits—though a few Red Hats might buy new cars just to own the libs!—but at least the personal cost of electing someone like Donald Trump would be made clearer.

    –alopecia

  • muselet

    Everyone purchasing a new vehicle in the near future should be reminded—repeatedly and without subtlety—that the sticker price includes an $x thousand Trump Tax to cover the various tariffs and market distortions this administration is responsible for.

    I doubt this would change anyone’s buying habits—though a few Red Hats might buy new cars just to own the libs!—but at least the personal cost of electing someone like Donald Trump would be made a bit clearer.

    –alopecia