NAFTA Replacement Shifts Car Manufacturing

After so many media outlets crying that the sky is falling with NAFTA being scrapped in favor of the new agreement, called the United States-Mexico-Canada Agreement or USMCA, the end result really doesn’t seem to be all bad.

When it comes to car manufacturing in North America, some big changes are coming, particularly for workers in Mexico. As the Washington Post summarizes USMCA, a “significant percentage of the work done” while assembling any vehicle must be performed by someone earning at least $16 an hour. That’s around triple what Mexicans have been paid while making cars.

This new agreement will lift some restrictions Mexican auto workers have faced when trying to unionize. While Republicans may not love that aspect, Democrats are pretty pleased with this move from the Trump administration.

Also, any vehicle not subject to tariffs here must have at least 75 percent of its components made in North America. That’s higher than the 62.5 percent requirement under NAFTA.

While everyone’s waiting to see the outcome, some economists think it will be mixed. While auto workers throughout North America will be guaranteed better income, small vehicle production might be sent to countries like China. Considering such vehicles aren’t really selling in this market any more, that could have little effect. Of course, with auto workers making more, their wages should have some effect on local economies. Really, this is a wait-and-see situation.