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The USA: Dismantling NAFTA to Raise the Price of Automobiles

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February 19th, 2017

The current talk about President Trump renegotiating the NAFTA deal is particularly placing the automotive industry under the spotlight since a large number of the automobiles sold in the USA are made in Mexico. Dismantling NAFTA could compel some of the automobile manufacturers to relocate their production facilities to the USA, thus having to forsake the benefits of a lower wage rate. The USA has an abundant reserve of natural resources including iron ore, heavily used in car bodies, but the production of iron ore has declined between 2010 and 2015. According to Euromonitor commodity price forecast, the price of iron ore is projected to increase by 3.5% between 2015 and 2025. Higher cost of raw materials combined with higher wages from relocating production facilities to the USA will push up the price of automobiles. This could prove difficult for the US citizens since they rely heavily on private transport due to an underdeveloped public transport infrastructure in most parts except the large cities including New York City and Los Angeles. For more please refer to the US country briefing on Natural Resources.

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