US auto sector bracing for sharp protectionist turn
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Exhibition Name: US auto sector bracing for sharp protectionist turn
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Protectionist policies under a President Donald Trump could upend the manufacturing model for automakers in North America, disrupting flows of goods essential to efficient production.

For Toyota Motor, Mexico is a key market and a core site for auto production, Chairman Takeshi Uchiyamada said Monday. He spoke at a groundbreaking ceremony for a vehicle assembly plant in the state of Guanajuato, addressing Mexican dignitaries including Secretary of Economy Ildefonso Guajardo.

The plant is a sterling example of how companies benefit from the North American Free Trade Agreement. The factory will take on production of the Corolla compact currently handled by a plant in Canada, letting that site specialize in larger vehicles. Paring down the number of models produced in each region will help Toyota supply the U.S. market more efficiently.

That is, if the Trump administration does not derail the plan. The President-elect campaigned on a pledge to withdraw from NAFTA -- a move that could freeze the flow of goods throughout the continent. Toyota "strongly supports" the trade pact, said an official based in North America.

Trump has come out against Mexican manufacturing in particular, pressuring companies operating there to return production to the U.S. throughout his campaign. In response to Ford Motor's plans to move small-car production to Mexico, Trump said he would levy a 35% tariff on foreign-produced cars imported to the U.S.

But global supply chains have become an indispensable part of auto production. Even vehicles assembled in the U.S. typically use parts such as cloth seat covers and audio equipment from Mexico, where they can be had more cheaply. By the same token, vehicles put together in Mexico draw a fairly high share of their parts from the U.S., given the dearth of component makers in the southern country.

Automakers would have trouble rerouting supply chains entirely, even if they were to move assembly back home amid political pressure. Car prices would also surge, an industry source said.

On the other hand, Trump's opposition to measures addressing climate change could give the auto sector a boost, some say. The Alliance of Automobile Manufacturers comprising 12 makers including Toyota and General Motors sent a letter to Trump's transition team last Thursday calling for looser fuel-economy regulations.

But not everyone in the auto industry is on the same page. Mileage regulations are growing tighter in Europe and Japan, meaning shifts in the other direction in the U.S. alone could make global development less efficient. While deregulation would be a plus for American automakers that have fallen behind on eco-friendly vehicles, Japanese makers, which have already invested enormous sums in such development, could see technological advancements slow.

Source: NIKKEI
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