Messing with NAFTA threatens NA automotive growth, jobs: Scotiabank

Global Auto Report warns interruptions could negatively impact the highly integrated supply chain.

TORONTO — Global car sales are looking good. February numbers show volumes are 6.9% ahead of a year earlier, they’re well above the 4% year-over-year gain during the previous two months and tracking to hit record highs for the eighth consecutive year.

But the Trump Administration’s push to renegotiate NAFTA has created “significant uncertainty” for the automotive industry in North America, warns ScotiaBank’s Global Auto Report.

“The integration of the North American auto market has enabled the sector to outperform on a global stage,” said Carlos Gomes, Scotiabank’s senior economist and auto industry specialist. “Any new restriction to the free flow of vehicles and parts among the three countries would have a negative impact on economic activity in Canada, Mexico and the US, including potential job losses.”

The report lays out the numbers. More than 92% of all auto industry shipments from the US are destined to the three NAFTA countries. The rapid expansion of assembly plants in Mexico is especially beneficial to the US: it accounts for one-third of American auto part exports. That’s an improvement over the less than 5% share prior to NAFTA’s inception. And the highly integrated auto supply chain has boosted US auto industry jobs by more than five times the growth of manufacturing jobs.

Messing with NAFTA could scuttle the North American auto industry’s global performance and result in job losses for some of the nearly 2 million positions at plants in the US, Canada and Mexico, the report warns.

Sales for March show continued record volumes in both Canada and Mexico.

Canadian sales were up 7% over a year earlier, driven by double-digit gains in both light trucks and luxury models.

Volumes in Mexico jumped 17%, even as interest rates moved higher and economic activity slowed.

US car and light truck sales declined to an annualized 16.6 million units last month, the lowest sales pace of the past year and well below expectations.

Asia led global car sales with a 16% year-over-year surge driven by double-digit year-over-year growth in China.

Sales in South America have been stronger than expected, advancing above a year earlier in February for the fourth consecutive month.

Click here for the Scotiabank Global Auto Report.


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