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Study: NAFTA exit border tax would hurt industry

July 28, 2017
As the Trump administration prepares to renegotiate the North American Free Trade Agreement, a new study from Boston Consulting Group warns that withdrawing from the treaty would hurt the automotive industry and fail to create new jobs in the U.S.
The study, commissioned by the Motor and Equipment Manufacturers Association, found that car prices, vehicle sales, supply chain decisions, and industry employment could all be negatively affected by the proposals.
"A retreat from NAFTA would greatly impede the industry’s relatively smooth and cost-effective flow of goods across borders in North America and around the world," said Xavier Mosquet, a Detroit-based senior partner at Boston Consulting.
According to Mosquet, leaving NAFTA would lead to the loss of about 25,000 to 50,000 jobs at U.S. auto suppliers.
Why? Because Mosquet says ending NAFTA would result in higher vehicle prices leading to a decline in car sales and an increase in prices and that would lead to decline in parts produced by auto suppliers with plants in the U.S.
The study estimated U.S. tariffs in a range from 20 percent to 35 percent would add $16 billion to $27 billion annually to costs at automakers and their suppliers. A 20 percent tariff would increase the production cost per vehicle by $650.
President Donald Trump, who campaigned on the slogan "America First," has said he wants to bring back automotive jobs that have moved to Mexico. 
The Trump administration this month released its negotiating priorities for talks with Mexico and Canada to negotiate a new agreement.
The Trump administration would like to complete a renegotiation of NAFTA by the end of this year, before elections take place in Mexico next year.
NAFTA, which went into effect in 1994, has been blamed for U.S. manufacturing job losses.