Automakers in the U.S. got a break when President Trump's renegotiation of the North American Free Trade Agreement exempted Canada and Mexico from the duties his White House has threatened on vehicle imports.
Under an addendum to the renamed U.S, Mexico, Canada Agreement, America's next-door neighbors can each ship up to 2.6 million vehicles a year to the country – more than they do currently – without paying a tariff, said Chris Krueger, an analyst with Cowen Washington Research Group, which has tracked federal policy for four decades.
That benefits carmakers that have developed supply chains crisscrossing the borders of three countries since NAFTA was approved in the early 1990s, but a risk remains for overseas companies like BMW, Volkswagen, and Toyota whose U.S. factories import parts from other nations.
Tariffs as high as 25 percent would still be assessed on auto parts from Japan and Europe if Trump moves ahead with a plan to impose levies under national security grounds, noted Colin Langan, an analyst with Swiss lender UBS. It's a plan largely opposed by the auto industry, which has warned the duties would curb profits, potentially cause layoffs, and drive up consumer prices. Sales slowed about 11 percent in September for U.S automakers Ford and GM.
Trump has largely dismissed tariff worries, including concerns that his protectionist policies on steel and aluminum imports as well as $250 billion of Chinese goods would undermine the benefits from last year's tax cuts. The successful completion of the North American trade agreement gives the U.S. more leverage in talks with Beijing, whose trade policies including appropriation of U.S. intellectual property have been a thorn in the side of American companies for years, he said.
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In a news conference announcing the revised deal, in fact, Trump said it couldn't have been achieved without the duties he has imposed so far, largely over the objections of Congress, business leaders and economists.
"Without tariffs, we wouldn't be talking about a deal, just for those babies out there that keep talking about tariffs," he said on Monday. "That includes Congress – 'Oh, please, don't charge tariffs.'"
Once the U.S. began imposing them, he said, countries including Japan and India began attempting to negotiate trade agreements.
"Because of the power of tariffs and the power that we have with tariffs, we, in many cases, won’t even have to use them," the president added. "That’s how powerful they are, and how good they are."
-- With assistance from Joe Williams.