Uncertainty over the future of trade is causing some Kentucky auto manufacturers to hold back on investment. The United States Mexico Canada Agreement, which would replace the North American Free Trade Agreement, still hasn’t been finalized.
Dave Tatman is the Executive Director of the Kentucky Automotive Industry Association. He said exports from Kentucky were down five percent in 2018 from the year before. Tatman disputes claims made by the Trump administration about U.S. auto manufacturers moving production to Mexico because of low labor costs.
“The fact is that Mexico has 44 different trade agreements with different countries that allow tariff-free trade,” he told WKU Public Radio. “And so if you build a product in Mexico you can export it to 44 different countries without any tax, without any export tariff.”
While Tatman doesn’t deny that wage rates are a part of the reason some manufacturers move their business to Mexico, he said it’s not the only reason. The industry is also waiting to see if they will face new import tariffs.
The U.S. Department of Commerce launched an investigation last year into whether trade in the auto industry posed national security risks. That report has been sent to President Trump, but the recommendations haven’t been made public yet.
The Commerce Department could recommend up to 25 percent import tariffs on automobiles and parts. Tatman said businesses are more hesitant to invest because they don’t know what the trade policies or tariffs are going to look like.
“We find the idea that the global automotive industry is a threat to national security to be very implausible. That just doesn’t make sense to us,” he said.
Tatman said there are virtually no vehicles built exclusively with one country’s products because it’s a global business. He said some parts cross borders six or seven times before a vehicle is finished.