Cars, trucks and crossovers imported into the United States from Mexico have surged to an all-time high in 2017 during the first year of President Trump’s administration.
In all, 2.33 million vehicles were shipped to the U.S. from assembly lines “South of the border,” a 9.4% increase over 2016, according to Mexican auto industry data. That reflects a variety of factors, including the opening of new Mexican assembly plants.
During his 2016 campaign, then-candidate Trump sharply criticized car makers for importing cars from Mexico and warned he would impose “a big border tax.” While Trump has not followed up on that threat his administration’s chief trade representative is engaged in a high-stakes bid to renegotiate the North American Free Trade Agreement that helped boost the Mexican auto industry.
Since start of NAFTA, Mexico has become one of the world’s largest automotive manufacturers. All but a handful of global automakers now run plants in Mexico and manufacturers have sharply increased production there in recent years.
The automotive industry sees benefits in producing vehicles in Mexico. One benefit includes low wages. But, Mexico also has the advantage of having negotiated more free trade agreements than any other country except Israel. That has allowed it to serve as a convenient manufacturing site for companies.
While Mexican-made vehicles are shipped worldwide, the U.S. remains the country’s biggest customer, absorbing 75% of the vehicles made there that were earmarked for export. Canada, at 8%, is the second-largest customer.
Many Mexican plants were struggling to keep up with demand. Demand grew especially fast for Mexican-made SUVs and pickups. Overall, FCA exports surged 35.5% for the year.
While federal officials have not commented on the increase in imports of Mexican-made vehicles, the news is all but certain to become a factor in ongoing negotiations aimed at revising NAFTA. Trump has even warned that he could kill the trade alliance, which also includes Canada, if he does not get an acceptable deal.
Automakers and their trade groups have warned, however, that any changes could negatively affect the industry and drive up vehicle costs for consumers. The auto industry has built up a massive and tightly interconnected network of plants in the North American region, said David Cole, Director-Emeritus of the Center for Automotive Research, in Ann Arbor, Michigan. In addition, erecting new barriers could cost the industry billions of dollars and reduce the efficiency of plants in all three countries.