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Weekly News Review | 27 March 2017 | Automotive Purchasing and Supply Chain Automotive Purchasing and Supply Chain

Talking Point

Mexico takes a breather amid NAFTA troubles

Mexico will be sighing in relief as we finally reach spring, following months of turmoil surrounding President Donald Trump’s inauguration that has left the North American Free Trade Agreement (NAFTA) in turmoil. Back in October last year, I visited Mexico City for our Automotive Leaders Summit, which brought together some of the most influential players from Mexico and North America to discuss, debate and share important topics that surrounded the automotive industry. To no one’s surprise, Trump sat at the centre of speculation, with a range of logistics service providers, OEMs, suppliers and government bodies all trying to prepare for the onslaught ahead. However, no one wants to jump ship in the - albeit unlikely - case that the US and Mexico make up, maintaining the long-established relationship that has provided mutual benefits for a number of years.

It seems ages ago that distressed Mexican leaders in the automotive industry were on standby for Trump cutting ties, trying to figure out other strategic alliances that would keep their heads above water and be done with the US before it was done with them. You can understand that, from Mexico’s perspective, walking away first would be the more dignified resolution, rather than hanging on to the struggling relationship. However, times have changed; both parties have now taken a step back from what could have been a messy breakup, both analysing the best outcome for cross border trading and, most importantly, delaying any cut offs for the next 25 years.

It seems as if an adjusted trilateral deal will come into place, which could conclude discussions - for now - over introducing any horrifying trading tariffs. By shifting the focus from politics to trade, Mexico’s automotive industry can relax for the moment, halting Trump’s attack on the country. This has also helped the Mexican peso, which has now inflated to 19 per dollar from nearly 22 to the dollar around Trump’s election. Let us hope for Mexico’s sake that, in the long run, we see this continued focus on improving NAFTA by further regulating and only adding slight tweaks that will keep the US happy, rather than shutting Mexico out altogether.

All of this is good news for the Mexican automotive industry, which still hasn’t lost any investments to different regions and is continuing healthy growth with exports and car sales increasing in 2017 from continued demand from North America. However, as we all know, this can all change very quickly. For now, Mexico can sit back with a Paloma and soak up the sun.

Alex Kreetzer

Alex Kreetzer - Digital Editor

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