ANN ARBOR, Mich. -- Douglas George, consul general of Canada in Detroit, says border adjustment taxes and other trade barriers won't help any North American manufacturers or consumers.
Speaking during a panel discussion this week at The Many Automotive Truths of NAFTA in Ann Arbor, Mich., George said the free trade deal was intended to benefit Canada, the United States and Mexico, and that the purpose of the trade agreement is to open borders, not close them.
“If we start putting up barriers, if we start disrupting trade, if we insist on buying only from what’s produced within our borders, we’re all going to end up worse off,” George said. “Resurrecting trade barriers is not going to bring jobs back.”
David Andrea, executive vice president of research at the Center for Automotive Research in Ann Arbor, said trade barriers, such as a 35 per cent tariff against Mexican automotive imports that Trump has mentioned, would cost at least 37,700 U.S. jobs.
He said the tariff doesn’t account for highly integrated supply chains. The average auto export from Mexico in 2015, for example, contained about 40 per cent U.S. content. Similarly, auto parts are passed back and forth across the Canada-U.S. border to be combined with other parts before being sent for final assembly, Andrea said.
The idea of a border adjustment tax has received much pushback from the auto industry, including major Canadian supplier Magna International and the Motor & Equipment Manufacturers Association in the U.S. Both have said the tax would hurt the auto industry.
But a tariff is unlikely, said Harley Shaiken, a professor at the University of California-Berkeley.
“I don’t think we’re going to see a 35 per cent tariff,” Shaiken said. “We could see other things, like a 20 per cent border adjustment tax -- but even that remains an open question.”
Andrea said a border adjustment tax would add an average of $1,930 to each vehicle sold in the U.S.
Added George: “I don’t think consumers would be all that happy.”
General Motors’ chief economist, Mustafa Mohatarem, says his company is closely monitoring President Donald Trump’s position on the North American Free Trade Agreement and is preparing to act to remain competitive.
“We’re obviously very concerned about many changes that affect our competitiveness in the U.S. market,” Mohatarem said Wednesday at the The Many Automotive Truths of NAFTA conference here. “We’re trying to understand how much of the cost would be affected if there was a change and what mitigation actions can we take.”
Mohatarem referred especially to how production of GM’s profitable full-size pickups in Mexico could be affected if changes to NAFTA result in more expensive border access.
GM assembles the Chevrolet Silverado and GMC Sierra in Silao, Mexico. In 2016, about 265,854 Silverados and 132,596 Sierras were produced there, according to estimates from the Automotive News Data Center.
Although no changes to trade among the U.S., Canada and Mexico have been formally proposed, GM and other automakers could face new tariffs on Mexican imports and/or a border adjustment tax on those products. Most panelists at the conference cautioned against U.S. protectionism.