In honour of Labor Day here in the US, President Trump tried to give workers across this land something to celebrate — the new trade deal with Mexico.
The proposal requires cars to be made at least 75% in the trade bloc of the US and Canada (considered domestic) plus Mexico to escape tariffs, and for at least 45% of the cars to be made in areas with wages of $16 or more.
Clearly if we’re setting those thresholds, then we’re driving (pun intended) more auto production to the US. Why else would we choose those levels?
After looking at the numbers, I can only guess that we picked percentages and prices that were the most favourable to Corporate America, not Working America.
It’s a matter of percentages
To illustrate my point, here’s a little quiz.
Try to put the following trucks sold in the US in order, ranked by the highest percentage of parts made domestically.
Chrysler Ram 1500
Given that we hear a lot of chest-thumping about Made in America and patriotic, flag waving advertising from truck makers about keeping America strong, you’d expect these high profit vehicles to be pounded out right here at home.
Well, it doesn’t exactly work that way.
While the truck with the lowest percentage of American-made parts is the Nissan Titan at 45%, the Chevy Silverado is close by at 46%.
The truck with the highest percentage of domestic parts is the Honda Ridgeline at 75%.
Look under the hood
Allow me a truck review for a moment: I’m a fan of the Ridgeline for functionality, but it doesn’t quite carry the cache of a decked out Ford F150 4×4 SuperCrew (which happens to be my daughter’s vehicle of choice).
A lot of Fords, in fact 65%, are made here at home — which matches the percentage of the Toyota Titans made here.
Much of the rest of these vehicles come from Mexico, so none of them would be subject to the new tariff when it comes to country of origin.
And, amazingly, we set the cut off for the amount of the car that must be made in a country with wages of at least $16 per hour (45%) — just below the amount of Chevy Silverado made domestically. It’s hard not to see that as intentional.
Very few cars fall under the new tariff rules, and those that do are not high-volume money makers.
So after months of posturing and strong words, we ended up with a trade deal that effectively acts a lot like the existing one, though don’t call it NAFTA.
There are some changes, like a six-year review and a 16 year term with the ability to renew, and it’s harder to avoid penalties for breaching the deal.
But maybe we should be thankful. Americans should all raise a beer (or other beverage of choice) on this holiday that President Trump didn’t press for dramatic changes that would force auto production back home.
If he had, it’s possible some of the millions of working Americans involved in car manufacturing might have made more money, but it’s certain that all of the car buyers would have paid more for new American cars.
Any such drag on the US economy would likely have ripple effects felt overseas, including in Australia. So this (US) Labor Day, relax, enjoy yourself, and if you feel like it, stroll across a new car lot and pick out a vehicle that’s ‘mostly’ made in America.
PS: Here’s the answer key to the quiz:
Percentage of Domestic Parts…
|Chrysler Ram 1500||57%|