Nafta changes could cost US auto industry jobs, raise car prices: study

[DETROIT] Imposing new tariffs on imports from Canada and Mexico could raise the price of new cars in the US by an average of US$1,100 and eliminate as many as 50,000 US jobs, according to a new study Wednesday.

The Motor Equipment Manufacturers Association (Mema) said the study shows the dangers of changes to the North American Free Trade Agreement, including steps such as a border adjustment tax or new duties.

And Mema president Steve Handschuh warned that such steps would not return jobs to the United States.

"Tax and trade policies that force companies to re-shore jobs will not work," Mr Handschuh said during a press briefing.

"The economics of re-shoring a significant number of jobs is currently not possible."

Xavier Mosquet, a senior partner at the Boston Consulting Group and lead author of the study conducted for Mema, said the motor vehicle sector depends on an integrated supply chain with plants in Canada, Mexico and the United States.

"Vitality in the motor vehicle sector hinges on a globally integrated supply chain," Mr Mosquet said.

"Introducing new tariffs, a border tax and a retreat from Nafta would greatly impede the industry's relatively smooth and cost-effective flow of goods across borders in North America and around the world," he warned.

The study found that US tariffs of 20 to 35 per cent would add US$16 billion to US$27 billion to automotive costs in the US market.

Manufacturers most reliant on imports would see its per-vehicle costs rise by an average of US$1,100.

The study also found that manufacturers and suppliers would not respond to a border tax or tariffs by bringing jobs back to the US.

Mr Mosquet estimated it takes nine years to recover the cost of building a new plant, and manufacturers and suppliers indicated they would continue to operate existing factories rather than building new US facilities.

As manufacturing costs go up under the weight of a border tax or Nafta tariff, companies likely would respond by reducing the content on the vehicles they sell, which would impact suppliers who provide the sophisticated safety equipment found on modern vehicles, Mr Mosquet said.

If US cars sales remained stable at around 16.8 million units annually, the reduction in the use of sophisticated technology and higher prices could lead to the elimination of 25,000 to 50,000 jobs at US factories, the study showed.

AFP