Trump Administration Closer To Striking Deal For North America Car Manufacturing

March 21, 2018
Rodrigo Cervantes
Mexico's car industry is booming.

The Trump administration is getting closer to agreeing with Mexican and Canadian officials on the required percentage of American components for cars sold in the United States, a top trade official told members of congress on Wednesday.

Negotiators working on the North American Free Trade Agreement are “finally starting to converge” on the required percentage of American parts for cars made in Mexico and Canada and sold in the United States, U.S. Trade Representative Robert Lighthizer told the House Ways and Means Committee.

American trade officials have demanded that at least half the components in the vehicles be made in the U.S. The ask pertains to what’s called “rules of origin” NAFTA provision for vehicles, one of the top traded goods in North America. Mexican and Canadian officials and car companies have argued that would make manufacturing in the region less competitive.

RELATED: As U.S. Prepares For NAFTA Talks, China Already Moving Into Mexican Auto Market

The Trump administration’s goal is to encourage companies to bring manufacturing jobs to the U.S., Lighthizer said.

“Our objective is to try to find the line where we can encourage them to move some of that production back to the United States,” Lighthizer said.
 
Also in the hearing on Wednesday, Lighthizer told Arizona Congressman David Schweikert that the administration is using the NAFTA talks to push Canada and Mexico to increase their threshold for duty-free products.

The U.S. charges for imports greater than $800 while Mexico and Canada have significantly lower thresholds: $50 and $20 respectively. This makes it easier for Canadian retailers to sell to U.S. consumers than the other way around, Lighthizer said.
 
“Everybody knows the right answer is to be above 20 dollars,” Ligthizer said. “It has to go up.”
 
Ligthizer echoed President Trump’s stated goal of reducing the trade deficit with Canada and Mexico. He has said he would like to wrap up NAFTA talks before Mexico’s presidential elections in July.