U.S. President Donald Trump has announced the renegotiation of NAFTA and slapping a 35% border tax on products imported from countries where production lines had been moved from the U.S.
The Japan External Trade Organization (JETRO) estimates that a tariff of 6% or more on cars produced by Japanese companies in Mexico and exported to the U.S. will cancel out the benefits of cheaper labor. These companies are certain to be forced to review their business strategy in North America.
JETRO used a report by an American auto industry-related research institute on Ford’s car production in Mexico as a reference. According to this report, the labor cost for assembling one car is $600 (approximately 68,000 yen) cheaper and the cost of parts procurement is $1,500 cheaper in Mexico than in the United States. Because there is no tariff under NAFTA, production in Mexico is $1,200 cheaper even after deducting the transportation cost of $900. JETRO estimates that a tariff of 6% or more will cancel out this advantage. (Slightly abridged)