"Investing": The potential cancellation of the US-Mexico-Canada Free Trade Agreement affects the US auto industry
The potential cancellation of the US-Mexico-Canada Free Trade Agreement could significantly impact the North American auto industry, with the country’s largest companies known as the “Big Three” – General Motors, Ford and Stellantis – facing the most fundamental challenges.
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The “Investing” platform highlighted The financial markets specialist highlights the critical role that Mexico and Canada play in the automotive supply chain, as more than 30% of vehicles sold in the United States come from these two countries, and Mexico is the largest contributor.
Moreover, Nearly 20 percent of the value of vehicles assembled in the United States depends on imported parts, so eliminating free trade status would not only disrupt supply chains but would also result in prohibitive tariff costs, especially for automakers that rely on production. Mexican.
The analysts pointed out that due to the high exposure to production from Mexico and the low exposure to other international markets that are not affected by the change in US tariffs, the three companies in Detroit… It will be among the original equipment manufacturers most affected.
For example, General Motors will suffer From a decline in margin of 2.6 percentage points from revenue, making it the most affected automaker under that scenario.
Ford will also face… and "Stellantis" Significant margin pressures, while automakers with diversified production bases, such as European and Asian brands, are less exposed.
The United States is the core market for both Mexico and Canada, absorbing more than 83% of % of Mexican exports and 75% of Canadian exports in 2023. Tariffs could also disrupt Asian auto and electronics manufacturers that rely on Mexico as a manufacturing center for the market. Last month, US President-elect Donald Trump pledged to impose heavy tariffs on Canada, Mexico and China, indicating a shift towards aggressive trade policies that could raise tensions with the United States’ largest trading partners.< /p>
Trump announced plans to impose 25% tariffs on imports from Canada and Mexico, linking the measure to efforts to reduce drug trafficking and illegal immigration, while these could be violated. The move includes a free trade agreement, which facilitates tariff-free trade between the three countries.
In addition, Trump proposed imposing a 10% tariff on imports from China, in addition to any existing tariffs, while remaining Details are unclear, as the proposal follows previous promises to impose tariffs exceeding 60% on Chinese goods.
US President-elect Donald Trump – who originally signed the United States-Mexico-Canada Agreement into law – will have 2020 after controversial negotiations – an opportunity to renegotiate the deal in 2026 regarding amendments or possible withdrawal.
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