Washington — As many as 50,000 workers at auto parts suppliers could lose their jobs due to increased tariffs if the U.S. pulls out of the North American Free Trade Agreement, according to a study released Thursday by the Motor and Equipment Manufacturers Association, which lobbies for suppliers in Washington.
The study, released as NAFTA negotiators from the U.S., Canada and Mexico meet in the Washington, D.C. suburbs, found that a 35 percent tariff that would be placed on auto parts that are made in the U.S. and shipped to Canada or Mexico without the trade agreement’s duty-free treatment would result in a job loss of 25,000 to 50,000 in the parts supplier industry.
“Costs due to a 35 percent tariff could decrease supplier content from 65 to 61.5 percent, potentially impacting supplier volume and thus manufacturing jobs,” the group said. “Employees working for suppliers with content that is most likely to be removed are most at risk.”
The finding comes as NAFTA negotiations appear to have hit several snags. President Donald Trump has threatened recently to withdraw completely from the deal, which was enacted in 1994 to create a free-trade zone between the U.S., Mexico and Canada.
Trump, who targeted NAFTA frequently during his election campaign, said in an Forbes interview that was published Tuesday: “I happen to think that NAFTA will have to be terminated if we’re going to make it good. Otherwise, I believe you can’t negotiate a good deal... .”
Asked about the possibility of negotiating a separate deal with Canada and Mexico if NAFTA falls apart after meeting with Canadian Prime Minister Justin Trudeau at the White House on Wednesday, Trump said: “We’ll see what happens. We have a tough negotiation and it’s something you will know in the not too distant future because we are going to be discussing NAFTA and we will be discussing defense.”
Current NAFTA rules require cars have at least 62.5 percent of their parts made in the U.S., Canada or Mexico. But some made-in-America hawks have pushed the Trump administration to advocate for an increase in the requirement to as much as 90 percent of autos to be made with parts that originated in the three countries in order to receive the exemption, or boost the percentage that has to come directly from the U.S.
On the campaign trail, Trump said he would end the trade pact with Canada and Mexico and slap a 10 percent to 35 percent tariff on vehicles and parts made in Mexico that are imported into the U.S. if NAFTA renegotiation is not a success. Critics have said that could add $5,000 to $15,000 to the price of a car.
The part supplier group said Thursday that U.S. automakers would be at a disadvantage if they face higher tariffs than their counterparts in other countries outside of North America do.
“Other automotive powerhouses in the developed world such as Germany and Japan also have complex and integrated supply chains similar to the US, with access to low cost production,” the group said. “Germany and Japan countries are able to achieve a positive trade balance in vehicles as well as parts driven mainly by focus on specialization and ability to keep OEMs in the country, leading part suppliers to stay.”