Donald Trump said he wanted to see more American-made vehicles. This is a convenient slogan and may have been a viable idea.
The problem is that there are no more American-made cars. And it has been several years.
Since the automatic agreement was signed by Canada and the United States in 1965, automakers have leveraged the comparative advantages of both countries to make the industry more competitive, more efficient, and more affordable.
Experts say tariffs will almost effectively eliminate these advantages.
“This is a trump bullshit that is not supported by paperwork [the] “The U.S. auto industry is worse than hurting Canada,” said Flavio Volpe, head of the Auto Parts Manufacturers Association (APMA).
Case study
Any vehicle made in North America is manufactured through a complex network of interconnected supply chains that use raw material and parts suppliers across the continent.
Consider the rear components of cars made in North America.
The figure is combined by APMA. It says it is based on the actual contract of the member. The company name was edited to respect the competition secrets.
Each point represents a different company, providing the materials or parts required for the finished assembly.
To further decompose the process, everything starts with raw materials in one country, molds into a part of raw materials in another country, and then moves again to assemble into a wider assembly, which is then eventually assembled and eventually shipped to the customer.
Rubber is processed in Monterrey, Mexico. It is formed as an Iowa connector. This work is suitable for control arm assembly manufactured in Brampton, Ontario. Place the control arm in a part of the rear suspension assembly in Detroit. The rear assembly was shipped to Windsor, Ontario for final assembly and eventually sold in California.
New North American Free Trade Agreement
You can create similar chains for every part in any car.
The entire process can only be feasible if these components can cross boundaries without tariffs.
This is a key component of the 2018 renegotiation of the NAFTA. The announcement said Trump heralds the newly signed United Nations-Mexico deal in Canada, a breakthrough in the U.S. auto industry.
“Once approved, this will be a new dawn for the U.S. automotive industry and U.S. automatic jobs,” Trump said in 2018.
However, when he announced the latest tariffs on Salvo, Trump's announcement essentially declared his trade deal failed.
“I have also been informed that agreements reached before 9888, such as amendments to the United States-Curia Free Trade Agreement and the United States-Mexico-Canada Agreement (USMCA) have not yet produced enough positive results,” the government wrote.
But removing the status quo will bring huge costs.
“In North America, there is no real car manufacturing in North America,” said Patrice Maltais of the global automaker in Canada.
He said the complex supply chain’s continental nature costs billions of dollars and took decades to build.
“You basically have to untie a lot of these supply chains and put down new ones, which takes a lot of time, which takes a lot of money.”
He said the losses of a new manufacturing plant could range from $2 billion to $10 billion.
“That’s just a plant, and then you have to look at all the supply chains for that plant.”
Even if the automakers actually agree to transfer production to the United States, it will take years to build.
Experts say tariffs will weaken the industry
Meanwhile, experts say the industry will be plagued by tariffs.
“You feel it almost immediately,” said Jan Griffiths, former Detroit-based American Automobile Association executive and founder.
During the 4th day of campaign in Windsor, Ontario, liberal leader Mark Carney announced that if he was elected prime minister, he would create a $20 billion “strategic response fund” to help workers affected by tariffs imposed by U.S. President Donald Trump. The fund will help build an all-Canadian network for automotive component manufacturing.
Instead of trying to use tariffs to force everyone to lose everyone, she said Trump should provide viable avenues for Canada, Mexico and the United States.
“If it's about renegotiating the USMCA, let's do it, but do it now, let's remove uncertainty from the system. Businessmen can't handle that uncertainty.”
But Griffith said the manufacturing bases that once existed in the United States were “no longer here.” Long time ago, it was replaced by one of the most efficient and cost-effective manufacturing processes in the world.
Even the undoing of the network has shaken the market threat, weakened confidence and attracted almost unprecedented attention from one of the largest industries across the continent.
