Automakers’ Meeting with Trump Shows Nervousness about NAFTA, Tariffs and China

While the Trump administration has been a mixed-bag of results for American and foreign automakers, there is evidence that some policy is drifting from the comfort zone of car makers, particularly when it comes to the North American Free Trade Agreement, or NAFTA and important tariffs on raw materials.

“Mr. Trump’s efforts to renegotiate the North American Free Trade Agreement, to impose tariffs on imported aluminum and steel and to reduce America’s trade deficit with China could limit the reach of companies that produce cars in the United States and depend on access to growing markets outside the country,” according to the New York Times.

On Friday, automakers’ CEOs, including those of the Detroit Big Three, sat down with the president for the first time in more than a year to discuss a variety of issues, including changes to gas mileage rules, which car manufacturers have vocally supported. On changes to NAFTA, however, the reaction has been less enthusiastic.

U.S. trade negotiators have proposed increasing the minimum percentage of a car’s parts that must be made in the U.S., Canada or Mexico to 85 percent from 62.5 percent in order to avoid import tariffs, with 50 percent of the parts originating in the U.S., according to the Detroit News. Car makers have lobbied against the rules, claiming they would make it harder for American manufacturers to compete.

Mr. Trump has continued to call NAFTA a “terrible deal for the United States” and indicated that automakers should “build more cars” in the U.S.

Fiat Chrysler Automobiles’ CEO Sergio Marchionne issued a statement after the meeting that he is “optimistic that the president can find a means to preserve a national program that drives continuous improvement in vehicle efficiency and, at the same time, allows us to build vehicles customers want at prices they can afford.”

Ford and GM both declined to comment after the meeting. In the first quarter of this year, GM sold more cars in China than it did in North America.

In the next few weeks, the Trump administration will be finalizing the rewrite of NAFTA and meeting with Chinese officials in an effort to prevent a trade war that will affect steel and aluminum costs and availability. Trade groups for automakers have expressed dissatisfaction with all the unknowns that could potentially have enormous impact on carmakers’ business.

“There are so many fronts open that introduce risk into the autos’ business, and the suppliers’ business, that I don’t know how you do any business planning at all right now,” Kristin Dziczek, VP for industry, labor and economics at the Center for Automotive Research in Michigan told the New York Times. “They’re playing with big money and big risk and big companies that employ a lot of people.