The United States wants 40 percent of the value of light-duty passenger vehicles and 45 percent of a truck’s content to be built at hourly wages of $16 to qualify for tariff-free import from Mexico.
Those demands are aimed at preserving relatively higher-wage U.S. and Canadian production and pressuring Mexico’s low auto wages.
Mexico wants 70 percent of a vehicle’s content to be made within North America, less than the 75 percent U.S. negotiators propose.
Automakers that do not comply with tougher U.S. or North American content and wage rules, if adopted, could face 2.5 percent tariffs on cars or sport utility vehicles shipped to the United States from Mexico. That may be a level of pain they can live with.
Automakers producing sedans, SUVs, and crossovers in Mexico include Ford Motor, Toyota Motor, Mazda Motor, Nissan Motor, Honda Motor, and Volkswagen.
The U.S. proposal would allow automakers to count salaries for engineering, research, sales, software and product development jobs, a provision favoring Detroit automakers versus foreign brands.
And companies would have two, four or nine years to comply, depending on the specific condition involved.
Still, some automakers are more of a question mark, especially when it comes to trucks. Toyota plans to expand production in Mexico of its Tacoma pickup trucks, part of a realignment of its North American manufacturing that includes a new $1.6 billion assembly plant in Alabama.
It also makes Tacomas in San Antonio, Texas, so could in theory switch production. The automaker declined to comment.
And the Trump administration proposals could complicate matters for electric vehicles and self-driving cars automakers want to build in Mexico. The U.S. proposals call for 75 percent of an electric or autonomous vehicle’s value to be made within North America to avoid tariffs.
Since much of those vehicle’s value can come from batteries made overseas, that means automakers must make up for the content largely on the human side.
At nine years, electronic vehicles are subject to the longest period until they must comply.
“EVs and AVs have so much electronic content and there is no electronics industry here,” said Kristin Dziczek of the Center for Automotive Research in Ann Arbor, Mich. “Nine years is not enough to build up an electronics industry to that scale.”
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