Ford has welcomed the tri-lateral trade deal just announced between the US, Mexico and Canada. The new free trade accord (pending ratification by lawmakers) replaces NAFTA and includes provisions on autos – pushed by the Trump administration – that make it less attractive to make cars for the US market in low-cost Mexico.
Ford has been among vehicle manufacturers targeted by Donald Trump in Tweets from his Twitter account that have criticised companies for not making more of what they sell in the US market in American factories.
Go deeper with GlobalData
However, while manufacturers have been faced with the need for some changes to sourcing policies, the agreement offers some relief from the worst case scenarios of having to radically change highly integrated regional manufacturing supply chains.
The trade deal includes changes to rules of origin on autos, which dictate that, to avoid tariffs, a certain percentage of an automobile must be built from parts that originated from countries within the three countries of North America.
Under the new rules, cars must be built with at least 75% of parts made in North America, up from 62.5% under NAFTA. Also, some 40-45% percent of an auto will have to be made by workers earning at least USD16 an hour. The changed rules of origin stipulations are aimed at preventing vehicle manufacturers making too many cars in low-cost Mexico for shipment to the US.
Ford said in a statement in response to the regional trade agreement that it is encouraged by the trade agreement.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataJoe Hinrichs, executive vice president and president of Global Operations, said: "Ford is very encouraged by today's announcement, and we applaud all three governments for working together to achieve free and fair trade in a strong regional agreement.
"We stand ready to be a collaborative partner to ensure this agreement is ratified in all three markets because it will support an integrated, globally competitive automotive business in North America. The benefits of scale and global reach will help to drive volume and support manufacturing jobs."
See also: Canada and US strike trade deal
Trump thanks Ford for cancelling Mexico plant
