Trump’s presidency may spell trouble for American car brands

Trump’s presidency may spell trouble for American car brands

The US elections have concluded and America will soon transition from the governance of a democrat to a republican. However, how will Donald Trump’s presidency affect the US automakers?

In a report by Reuters, American automakers start feeling the pressure of Trump’s win. Companies like Ford and General Motors (GM) fear the risk of higher production cost as they have been dependent with America’s open trade with Mexico.

Why? Because Trump promised to scrap North American Free Trade Agreement (NAFTA) – a trilateral trade settlement between the US, Canada, and Mexico. As part of the “Make America Great Again” campaign, the president-elect’s conviction of bringing jobs back to the Americans spells trouble for companies that outsource their production manpower across the border.

Ford announced in April that they will be investing in a $1.6 billion (around P 78.6 billion) expansion to produce their small cars, such as the Focus and Fusion, in Mexico. This was then followed by a news in September that the small-car production will leave the US plants completely – a move that hit the nerves of Trump.

Although Bill Ford, Ford Executive Chairman, said that expanding to Mexico will not affect jobs in the US, it has been reported that US auto factory employment decreased by a third from 1994 to 2013.

On other hand, GM, in which Chevrolet is under the umbrella of, also announced its plan of investing $5 billion (about P 245.3 billion) in Mexico. This, too, drew attention from Trump.

With that said, Trump threatened to impose taxes on cars that will be shipped back to the US from foreign production plants. Charles Chesbrough, senior economist and executive director of strategy and research at the Original Equipment Suppliers Association, said that this move will make the price tags of American cars go up by at least $5,000 (about P 246,000).

Moreover, mentioned car manufacturers, heavy equipment maker Caterpillar, and a number of their suppliers have already invested billions of dollars outside US, banking on the open trade policies with Mexico, China, and other countries.

As reported by Forbes, Trump’s presidency will not only mean trouble for NAFTA, but also with other US trade partners such as the European Union, Japan, and South Korea.

As for the Philippines, the future is still unclear for the American car brands. We may or may not be affected by the new presidency soon. However, Trump’s policies can affect the global economic trend, which can sprout an apparent domino effect.