What a NAFTA Renegotiation Could Mean for Car Prices in the US

The Trump administration’s goal for car sales in the US is for each car sold to have parts that are 85% regional. Under the current NAFTA deal, 62% of parts come from N. America. Of the 85% of regional parts the president and his team want 50% of them to be sourced in the US. Canada and Mexico see this as a deal breaker.

The Center for Automotive Research predicts a 450,000 unit loss of sales on imported light vehicles if the 35% percent tariff proposed by President Trump were enacted–this 35% tariff would apply to all vehicles not meeting content and manufacturing requirements.

IHS/Markit claims that 1.8 million vehicles produced in Mexico in 2016 were sent to the U.S. sales market. Experts say the U.S. simply doesn’t have the capacity to take on that level of manufacturing. Automakers would be forced to look elsewhere for their needs and would then have to pay the tariff. This would add anywhere to $5k-$15k to the sticker price of a new car. This could well result in a dangerous slump in the automotive business.