Trump Trade Policy Worry Upsets Mexico Business.
“Our base case assumes a low likelihood that the U.S. would pull out from NAFTA”
Worries about the implications of Trump administration trade policy are disrupting suppliers and manufacturers doing business in Mexico, according to U.S. credit rating agency Standard & Poors, although it doesn’t expect America to ditch NAFTA.
“Ongoing debate and reform around U.S. trade agreements and tax policies may disrupt supply chains and increase credit risk for automakers and suppliers with significant manufacturing ties to Mexico,” said S&P in a report.
There could be supply challenges if the new administration follows through on a border tax for imported vehicles.
“Even if the new President’s position on trade effectively turns out to be less punitive and more modest, some downside credit risk could persist for U.S. automakers and suppliers, if they are unable to offset potentially increased costs and pricing pressure,” S&P said.
S&P doesn’t think the worst case scenario will happen.
“Our base case assumes a low likelihood that the U.S. would pull out from NAFTA (North American Free Trade Association).
“Over the coming months, we will be able to get a better sense on how the campaign platform rhetoric will transform into government policy,” S&P said.
Trump earlier in January warned the U.S would impose a border tax of 35 per cent on 3 series cars BMW plans to build in Mexico and export to the U.S.
BMW said the plant would still be viable if it didn’t sell any cars from the Mexico factory in the U.S.
Meanwhile it wasn’t clear if Trump, as president, had the power to impose a border tax, or change the NAFTA treaty. This power resides with Congress.