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Auto Industry Hit by US-Mexico Border Dispute

Zacks Equity Research

The U.S. auto industry braces for impact this morning, as border delays with Mexican auto parts deliveries are currently experiencing “serious delays” into our country. The integrated North American auto industry — where parts often cross the border several times before finally being installed in an automobile — is now threatened by policy shifts for the business of automakers and suppliers on both sides of the border.

This industry generates $1.7 billion in trade per day, but gridlock has dwindled the number of shipments reaching their destinations by roughly half. Popular pickup truck brands like Chevy Silverado GM and Fiat Chrysler’s FCAU Ram trucks are among those to be most deeply affected.

The Trump administration has transferred 750 border agents away from commercial processing to deal with growing immigration realities at the southern border, where a new influx of families prepare to cross into the U.S. from various troubled countries in Central and South America. While immigration from our neighbors to the south had subsided in recent years, these numbers are expected to spike up in 2019.

Last year, 2.6 million autos were exported from Mexico to the U.S. — the best year ever for this integrated industry. In fact, more than 15% of U.S.-sold cars, pickups and crossovers were sold in the U.S. in 2018. Now, gridlock threatens the businesses of not only the big auto companies, but parts suppliers and car dealerships, as well.

The White House has also set its sights on imposing new tariffs on European goods imported to the U.S., such as wine, cheese and things like passenger helicopters. This is in response to what the administration feels are “unfair” subsidies to airplane manufacturer Airbus, the main competitor of U.S.-based Boeing BA.

Approximately $11 billion in goods from the European Union (EU) is reportedly expected to be affected. The U.S. Trade Rep awaits a ruling by the World Trade Organization (WTO) this summer. These tariffs appear to follow similar trade policy the Trump administration has implemented with Chinese trade, which has led to tensions that have affected economies both in China and the U.S. since last autumn.

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