The Trump administration is seeking to use the NAFTA to promote the US steel and other basic materials industry.
They propose stricter automotive content rules that require the use of North American steel, aluminum, copper and plastic resins.
These materials will be the first time in the NAFTA on the tracking list of auto parts.
US Secretary of Commerce Wilbur Ross vowed to make up for the “loopholes” in the parts list, saying that allowing cheap parts of Asia and other parts of the United States to enter the United States. The proposal also push the steel and aluminum industries that Ross tried to protect the subsidies imports through a national security assessment.
Kristin Dziczek, a trade and labor economist at the Automotive Research center in Ann Arbor, Michigan, said that gains from tracking steel and aluminum would be offset by the higher overall content thresholds and the need to find other sources for electronics.
Dziczek and automotive industry groups said the U.S. content proposal is likely to backfire, with automakers and suppliers simply choosing to pay the 2.5 percent U.S. tariffs for passenger cars and many parts, sourcing more of them from China and other low wage countries in Asia.
“That could be the preferred trading route if NAFTA becomes too strict, and that means content could come from any country with most favored nation status,” she added.