Editor’s Note: President Trump signed the revised North American Free Trade Agreement into law on Wednesday, January 29th, 2020. The signature of the USMCA effectively eliminates most cross-border supply chain concerns for movement of goods and services between Canada, Mexico, and the United States. For countries looking to produce goods and services for final consumption in the US, the main appeal will be cross-border investment into Canada and Mexico – where years of uncertainty and relatively weak growth have led to weak exchange rates and significantly lower domestic wage costs. Especially amid immigration restrictions in the United States that have impacted skilled service workers, tapping into the human capital rich cities of Vancouver and Toronto will be attractive for many firms.
Over the last 25 years, the United States, Mexico, and Canada have formed highly integrated automotive supply chains; auto exports from Mexico to the United States nearly doubled between 2011 and 2018. Proposed changes to the rules of origin (ROO) and wage requirements in the USMCA will impose higher prices on OEMs and automotive firms, straining supply chain relationships and hurting consumer confidence and demand.
Many firms have yet to define their strategy to transition from NAFTA to the USMCA. In our latest whitepaper, Analyst, Emilie Newton and Managing Director, Abey Abraham outline DuckerFrontier’s base-case, upside, and downside 2020 scenarios for automotive firms surrounding USMCA legislation. Firms should use this scenario-based planning to prepare for continued uncertainty through the United States presidential election in November 2020. Executives should revise production portfolios to match slowing demand and reach profit goals, as well as reassess investment expansion strategies and costs both in Mexico and outside of North America.
To build the right plan for your business to navigate uncertainty surrounding USMCA legislation, contact a DuckerFrontier automotive expert today.