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Did The Big Car Makers Just Throw a Wrench in Trump’s NAFTA Plans?

October 24, 2017
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It is no secret that since NAFTA renegotiation began earlier this year, President Trump has endorsed a protectionist agenda. High tariffs on companies that directly compete with American businesses have already been imposed and it looks like that policy will continue going forward.

Read: Are NAFTA Negotiations Changing the Currency Game?

However, one of the industries that the president is so zealously protecting has other ideas. Reuters reports that major American car manufacturers have rallied together to prevent NAFTA from being torn up.

The auto coalition, which includes the Motor & Equipment Manufacturers Association and American International Automobile Dealers Association, said ending NAFTA, which underpins $1.2 trillion in annual trade between the three countries, would put U.S. auto sector jobs at risk. – via Reuters

This is a major development, especially as the debate over the car industry has taken on even greater importance in the negotiation process. There is a tremendous amount of interplay between all three member countries in this industry and protectionism may not be the bets way forward for them, despite the fact that they are based in the United States.

The Detroit News writes that:

Automakers and their suppliers are warning such a dramatic shift in NAFTA rules could cost 50,000 or more U.S. jobs. That would surely throttle the growth and employment numbers of which Trump is so proud. Business groups have been lobbying the administration and Congress hard to rethink the aggressive NAFTA proposals.

Such a massive decline in jobs would be incredibly damaging to the economy of the United States as well as Canada and Mexico. The Detroit News also argues that scrapping NAFTA will cause American steel companies to have far too much control on the market which could drive prices through the roof.

This new automotive alliance could change the entire game. With these companies expressing their concerns, the president may be forced to tweak his stance on some of the key issues that have stymied negotiations lately. Investors should look at this development with interest, especially if they own automotive stock.

To read Reuters’ article about the new auto industry coalition in the U.S., click here.

To read The Detroit News’ editorial on the car industry and NAFTA, click here.

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