Despite Trump’s Tariff Threat, Automakers Double Down on Mexican Production

President Trump’s threat of imposing 20% tariffs, or earlier 25% tariffs, on foreign produced cars has failed to dull the allure of Mexico’s maquiladoras for global manufacturers looking to cash in on the country’s cheap labor. Mexican car manufacturers produced a record 1.6 million vehicles in the first five months of 2018, up by 10,000 from the same period of 2017.

Recent data from the Mexican Association of the Automotive Industry (AMIA) show that in May Mexico’s automotive plants produced 3.9% more light vehicles than in the same month last year. Domestic sales were down 8.9% from January to May, but Mexican assemblers continue to work at full capacity thanks to rising demand for exports. In 2017, Mexico produced 3.7 million cars. During the same year the US goods trade deficit with Mexico surged to $71.1 billion, a 10.4% increase ($6.7 billion) over 2016.

And automakers continue to bet on Mexico. On Thursday, GM revealed its new Blazer starting with model year 2019. But this won’t be the rugged truck-based old Blazer that GM killed 14 years ago, but a car-based compact SUV. And it will be made in Mexico.

“GM employs over 15,000 production workers in Mexico, pays the workers less than $3 per hour, and exports over 80 percent of the vehicles to the US to sell here,” UAW vice president Terry Dittes lamented in the statement Thursday night, cited by the Detroit News. “This is all happening while UAW-GM workers here in the US are laid off and unemployed.”

In Mexico, where assembly line workers earn on average around $2.50 per hour compared to $28.70 per hour in the US, fears are rising that Trump may carry through on his threat to impose tariffs on imported cars, SUVs, vans, light trucks and automotive parts. Canada and Mexico are the top two suppliers of vehicles to the US. If these tariffs were to cause a shift in production from plants in those countries to plants in the US, they’d feel the economic pain…

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