A proposed trade deal between the United States and Mexico would allow President Donald Trump to penalize 25% of Mexico’s imports of cars, SUVs and auto parts for certain volumes, officials and sources said on Tuesday.
The United States and Mexico agreed on Monday to discuss the North American Free Trade Agreement (NAFTA) and put pressure on Canada to adhere to the new rules on trade in motor vehicles and the settlement of disputes.
But the parallel undeclared agreement between the two countries would allow the United States to pursue national security charges on the annual imports of Mexican cars and SUV that values more than 2.4 Million vehicles.
The deal would enable levy of national security for auto parts imports worth more than 90 Billion a year for the same reasons. The Government intends to publish the results of a study on whether imports of cars and parts present a national security risk in the coming weeks.
The study can be used to justify the 25% tariffs applied by the US on car imports, claiming that protecting the US auto industry is vital to national security in the context of a trade law.
The carmakers are concerned about the agreement indicating that the United States will continue to apply national security tariffs, and will probably also use tariffs to obtain concessions from the Japan and European Union. They said tariffs could lead to huge job loss and drastic increase price hike of vehicles.
A separate subsidiary agreement outlines a possible scenario in which the United States would increase its normal most favored nation rates on automobiles, which currently is 2.5%. A potentially new and unspecified rate would apply to vehicles that do not conform to existing or renewed NAFTA.