US election: ‘wide ranging implications’

The US election results have raised questions concerning the future direction of the NAFTA free trade agreement, which has clear potential implications for the auto industry. Here IHS Markit offers its perspective.

The unexpected victory of Donald Trump in the presidential election potentially presents wide ranging implications particularly for trade both inside NAFTA and in the rest of the world.

IHS Markit forecasts the result does not present any imminent economic rupture or time-critical event, as policies have to be first formulated in detail, likely moderated in negotiation, and then only implemented after a process that includes Congressional review, oversight, and approval.

However, there are certainly elements to his campaign platform and the 100-day plan for the Trump presidency that could significantly affect the North American automotive industry, NAFTA, and production, imports, and exports between the signatory countries.

The IHS Markit forecast reads, ‘Trump has been openly hostile to NAFTA and stated that he would withdraw the United States from the TPP in its current planned form. In 2015, vehicles built in Mexico accounted for an estimated 11% of total US light vehicle sales, up from five per cent in 2005. In the long term, a US withdrawal from NAFTA could have potential implications for vehicle manufacturing in Mexico, which produced almost 3.4m units in 2015.

‘Trump has said he will put pressure on the CEOs of US companies with significant overseas production, such as Apple, to bring this capability back to the United States. But it remains to be seen if Trump will carry out some of his more controversial pledges made during an often contentious campaign. He also made many commitments that require the support or approval of the US Congress. While both the House of Representatives and Senate will have a Republican majority, Trump’s campaign was not supported by the entire Republican party. Typically, a Republican president can get more done if the Congressional houses are both Republican, but political power in the United States involves a system of checks and balances.’