Pacific trade deal cuts U.S. tariffs on light vehicles, sets new duty-free benchmark for local content

In this article, the expected effects of the Trans-Pacific Partnership, known as TPP, on the auto industry are described. TPP is a trade deal promoted by President Obama that would effect the NAFTA countries (USA, Canada, and Mexico) as well as Japan. It furthers the free-trade sentiment of NAFTA, and is currently being debated in the senate. If passed, the TPP would lower protectionist tariffs on many imported goods to America in exchange for the lowering of foreign tariffs on American exports. Specifically, this article talks about the elimination of the current 2.5% tariff on Japanese cars and 25% tariff on trucks that would be caused by ratification of TPP. Lobbyists who are lobbying to keep the current protectionist tariffs argue that the deal would not be good for American auto-workers, as imports of cars will undoubtably increase, whereas auto exports will likely remain stagnant. These protectionist tariffs, which have existed for more than 50 years, have boosted the US auto industry, allowing them to compete with an advantage against the cheaper-to-produce cars of Japan. Without the tariff, the Japanese car companies will increase their exports to America, increasing the supply of foreign cars in the US and lowering their prices as well. Although the American consumer would likely benefit from this trade agreement, as the prices of foreign cars will decrease, this will put strain on the US auto manufacturing industry, and layoffs will likely ensue as the US auto industry will lose some of its influence in the US and global economy.

1 Comment »

  1. morrimad Said,

    October 15, 2016 @ 3:37 am

    How would you say protectionism helps the US auto industry? Do you find it detrimental in any way?

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