October has brought the hard-to-miss news that the US, Mexico and Canada have agreed a new trade deal, the US-Mexico-Canada deal (USMCA). The auto industry is set to win big from the deal, with any car with over 75% of its production taking place in North America to be tariff-free. This means that American carmakers will see a boom in production and profit.
Ultimately this will create benefits for the car buyer . The uptick in production should see greater impetus for the classic American carmakers to put money into new models once again. This means slightly increased costs against more varied, better quality and more ethical cars.
How cost will increase, but for good reason
It’s important to note that costs will increase with USMCA. However, this is not necessarily a bad thing. As the WaPo have pointed out, there will be less exploitative use of cheap labor and increased compliance to ensure tariff controls are being met. This will increase the first-time buy cost of a new vehicle.
However, buying from home has been shown to reduce costs by providing more options, including on insurance cover and import costs. Cars will be more easily bought with improved safety features and technology, such as dashcams, when unrestrained by trade deals. This will improve insurance premiums and also the level of assurance when accidents do happen. Furthermore, while the measure also means that less will be built south of the border, meaning a lower variety of imported car models, ultimately, this will lead US manufacturers to fill in the gap with new models.
Greater assurance over model origin
Global Trade Mag recently made an important distinction in American cars; more often than not, foreign brands are assembled in the US following manufacture, and will often have more of an American imprint than Detroit brands. As a result, many of the classic all-American brands don’t have the hallmarks of US production. The USMCA deal will see production come back into America, and so drivers can be more assured that when they buy a brand, they buy assurance over its country of origin, too.
What are the long-term effects for car buyers?
In the long term, the negatives of the trade deal should lessen in comparison to the positives. The WSJ surveyed some of the USA’s biggest automakers and found them optimistic, stating they would be able to continue with factory investment. This means more cars, more development, and more savings in the long run. The average worker in the US and Mexico will benefit, as now, at least 30% of all workers must receive $16/h or better. That means you can feel better about your next car purchase.
While the new Trump trade deal might drain money in the short-term, this will be counterbalanced by a greater variety of car types and reduced costs elsewhere. As the years wear on, expect to see more all-American vehicles and workers in a better state. Costs will lessen, the ethical treatment of workers will continue, and you, as the car buyer, will benefit.