Canadian Legislative News

NAFTA Outcome May Affect Auto Pricing

As the federal government under Prime Minister Justin Trudeau approaches its third year - the midpoint of its current mandate - renegotiation of the North American Free Trade Agreement (NAFTA) continues. The ramifications of a still highly uncertain multi-round set of discussions may be felt by many sectors in Canada, particularly in the auto sector, if talks continue along their current track.

Key players in the discussions admit that talks are not progressing as anticipated, and each country has positions that affect negotiations. Further challenging negotiators is the Mexican presidential election in 2018. If a new deal is not done by early next year at the latest, Mexican federal politics will complicate matters significantly. The same is true in the United States, where campaigning for mid-term Congressional elections will begin in Washington early in the new year.

In the auto sector, the risks are significant. If higher country-of-origin thresholds are imposed for duty-free qualification under NAFTA, the disruption to the integrated continental auto market would be massive. Higher costs imposed on manufacturers would inevitably lead to higher costs for consumers and fleet managers alike for new vehicles from North America.

If NAFTA is altered significantly, or, as President Donald Trump often mentions, if it is dismantled, the direct impact on the North American auto sector would have an impact on consumers and fleets in terms of unpredictability, pricing, and availability of equipment.

Secondly, the overall economic disruption a weakened NAFTA may cause could hurt all sectors. For fleet – and everyone else – the strong hope is that beneficial solutions will prevail on NAFTA, an agreement that has done a great deal of good for the economies and consumers of all three signatory countries.