DETROIT — The U.S. auto industry faces trade uncertainty, including questions whether a new trade pact is ratified and possible new tariffs, an industry analyst said today.
The United States-Mexico-Canada Agreement “might incentivize more (U.S. vehicle) production but it has to pass first,” Kristin Dziczek, a vice president of the Center for Automotive Research, said at a conference at the Detroit branch of the Federal Reserve Bank of Chicago.
USMCA is intended to replace and update the North American Free Trade Agreement. The accord must be ratified by both the U.S. and Canada before it can take effect. Mexico has approved the pact.
Unions have concerns about USMCA, Dziczek said.
“Until you see labor change, a lot of Democrats will have trouble voting for this,” she added. If unions “are actively opposing, it will be very hard to pass.” Democrats, generally supported by unions, control the U.S. House of Representatives. Republicans control the Senate.
The administration of Donald Trump also is considering whether to levy 25 percent tariffs on vehicles imported from Japan and the European Union. The U.S. is seeking new auto trade agreements. If no such accords are reached by mid-November, the tariffs may be implemented.
“I’m still very concerned about mid-November,” Dziczek said. “They’ve got a big sword and they’re waving it around.”
Tariffs are paid by importers, who usually pass the costs onto customers. Tariffs are not payments from one country to another.
Current negotiations between the United Auto Workers union and General Motors Co. also may affect production capacity, she said.
Dziczek estimates the U.S. has 3 millions of “under-utilized” vehicle-production capacity, with GM having 1 million of it. GM has said four U.S. plants won’t be allocated product after this year. One of those plants, in Youngstown, Ohio, has already ceased operations. But they can’t be formally closed until the two sides negotiate a new labor agreement.
The UAW’s contracts with GM, Ford Motor Co. and FCA US LLC expired at 11:59 p.m., Sept 14. The UAW said Sept. 3 it’s negotiating with GM first. Contracts at Ford and FCA will be extended while negotiations with GM take place.
The fate of the four “unallocated” plants is still up in the air, Dziczek said. “Nothing is dead until it’s dead.”