DETROIT — Congress needs to adopt a new North American trade pact to keep new vehicles within reach of U.S. consumers, the National Automobile Dealers Association says.
Charlie Gilchrist, NADA’s 2019 chairman, last week pointed to ongoing affordability challenges as a reason why the group threw its support behind the United States-Mexico-Canada Agreement.
In remarks to the Automotive Press Association here, Gilchrist said the North American Free Trade Agreement that has guided trade among the three countries since the 1990s made the U.S. auto industry more competitive — including the Detroit 3 and international automakers that assemble vehicles in the U.S. — and rewarded buyers with more affordable vehicle choices.
USMCA, which President Donald Trump negotiated with the leaders of Canada and Mexico to replace NAFTA, “will enable dealers to continue providing affordable vehicle options for American consumers,” Gilchrist said.
“I think most Democrats and Republicans are for it because it just makes a lot of sense,” Gilchrist told reporters. “The political environment that we’re in could derail it a little bit, but you know, [House Speaker] Nancy Pelosi says they’re going to continue doing business, so hopefully they’ll continue to do business and get this bill passed.”
Even without trade concerns, average new- vehicle transaction prices keep climbing, raising average monthly payments and extending borrowing terms.
In May, the administration lifted tariffs of 25 percent on steel and 10 percent on aluminum on Mexico and Canada, so the countries’ legislatures could ratify USMCA. Ford Motor Co. and General Motors estimated the financial hit from the tariffs at $1 billion.
Gilchrist told reporters that some automakers absorbed the higher costs without passing them down to consumers. When asked whether automakers could sustain that, he said he hoped a deal on USMCA would resolve the issue.
In addition, Trump could decide next month to impose 25 percent tariffs on imported vehicles and auto parts over national security concerns, which has further stoked fears that shoppers will be excluded from the market by high prices. The average price of a light-duty vehicle in the U.S. would rise by $2,750, assuming a worst-case scenario that includes those tariffs on imported autos and parts except from Canada, Mexico and South Korea, according to a February briefing for NADA by the Center for Automotive Research in Ann Arbor, Mich.
CAR estimated that new-vehicle dealerships could lose as many as 77,000 employees in that scenario. That’s fewer than the 117,500 estimated in 2018, before the paper was updated to include more details about how the percentage of parts sourced in North America would be counted, Kristin Dziczek, vice president of industry, labor and economics at CAR, told Automotive News.
NADA CEO Peter Welch told Automotive News last week that he anticipated legislation to implement the agreement could reach Congress this month, setting up a possible House vote by Thanksgiving. Yet that may be optimistic: Richard Trumka, president of the AFL-CIO labor union, raised doubt about the prospect with The Washington Post, saying the deal “would be defeated.” How labor provisions would be enforced, particularly in Mexico, reportedly remains an ongoing discussion.
Talks on USMCA also are happening amid House Democrats’ impeachment inquiry into Trump and as the clock ticks closer to the 2020 presidential election.
That backdrop doesn’t mean a deal can’t happen, Dziczek said, but “they’re trying to thread a very narrow needle this fall to get it passed this year.”