Could a Trump Presidency Ruin the Auto Industry as We Know It?
Let’s go out on a limb and branch out into the political realm for a moment. According to Automotive News, after unveiling his economic plan to attendees at the Detroit Economic Club recently, Republican candidate Donald Trump promised to “renegotiate — or toss out — the North American Free Trade Agreement,” calling it “a disaster for American jobs, and a job killer.”
Don’t get us wrong; we are all for generating American jobs and bolstering our economy, but we are in complete agreement with Auto News in that dissolving the North American Free Trade Agreement (NAFTA) will likely be a disaster. For decades, the automotive industry has evolved in order to keep up with the world’s demand for cheaper automobiles, forcing manufacturing plants to shift southward, landing companies like Volkswagen, Honda, Toyota, Mazda, Nissan, GM, Ford, and Chrysler on Mexican soil.
Let’s also not forget our neighbors to the north, where Canadian plants generate tens of thousands of Chrysler, Ford, GM, Honda, and Toyota automobiles every year, and have been doing so for decades. Now, all of that expensive infrastructure (both north and south of the border) could be at stake if Trump secures the presidency, because if it were up to him, auto manufacturers would be forced to return to U.S. soil in order to “make America great again.”
When NAFTA was passed in 1994, people said it would siphon jobs away from middle class Americans, so when the auto industry and suppliers pushed back, their claim was that it would make the industry that much more competitive instead. Twenty-two years later and it looks like both sides were right; competition remains fierce, but to the tune of hundreds of thousands of jobs being swept across our borders and into neighboring countries. The quality standards of plants in Europe, Asia, and America remain implemented at all times, it’s just that the vehicles are not solely made on their home turf anymore. Being that the Big Three all have sizable plants in Mexico, that puts a massive bee under Mr. Trump’s bonnet.
Forbes has its own take on the matter; Citing that if elected president, Trump vows that “Americanism, not Globalism, will be our new credo.” This came after he ridiculed Hillary Clinton (and by extension, Bill) for supporting NAFTA, claiming that it cost the auto industry more than 100,000 jobs, even though Presidents Reagan and George Bush were instrumental in its fruition. Trump went on to skewer Clinton’s support of the Trans Pacific Partnership, a trade deal that he claims would be “an even bigger disaster for the auto industry.”
While Forbes reports that Michigan has indeed lost more than 100,000 auto manufacturing jobs since 2000, that number has been on a rebound since 2009, which Trump’s speech at the Detroit Economic Club didn’t address. Labeling Detroit as a “living, breathing example of my opponent’s failed economic agenda,” Trump claimed that under his presidency, Detroit would come “roaring back,” although the city already appears to be on the rebound due to the Big Three having their best year in history.
Another thing to keep in mind is that outsourced automotive plants aren’t just designed to send cars back to the U.S., but to allow automakers like Ford and GM the chance to thrive by selling to emerging markets like China and Brazil. But as Forbes is quick to point out, labor rates in Mexico are also about 80% cheaper than in the U.S., and highlights that Mexican trade policies are “among the most liberal in the world.” Since Mexico has free trade agreements with all of the automakers we’ve mentioned, if they were suddenly forced to pull out due to Trump’s hardline push for bringing automotive jobs home, the industry could conceivably lose billions.
Even if elected, there would still be many hoops Trump would have to jump through in order to make U.S.-made a mandate, and even then, the lobbying against this move would be fierce to say the least. Forbes nailed it when it openly attacked the billionaire’s ideological plan to bring automaker jobs home with this simple statement: “The problem with Trump’s position is that it’s not possible to wind back the clock on globalization. The auto industry went global long before NAFTA was enacted, and automakers today are heavily dependent on their international supply chains.”
So in 2016, the idea of “Buying American” is vastly different than it was in decades past. Finding a car with 100% of its parts sourced from U.S. manufacturers and refineries is virtually impossible, and believe it or not, a Honda Accord is ranked as American as a Jeep Wrangler. Regardless of your politics, if you’re committed to cars built right here, the Kogod School of Business has these options in its annual American-Made Index. But one thing is clear: Times have changed since most of our cars were rolling out of the midwest, and there’ no way to make things go back to the way they were. The sooner people like Trump figure that out, the better.
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