Why NAFTA is Important and What Car Buyers Need to Know

By: Somerville Auto   |   17 Sep 2018
two people shaking hands

As a Canadian, especially one thinking of purchasing a vehicle, you may have heard about the uncertainty surrounding NAFTA agreements involving Canada and the United States. With no end in sight and no solid deal on the table, the potential threat of auto import taxes and tariffs is real.

There are three key considerations to think about when it comes to the automotive industry and the NAFTA agreement:

1. How tariffs will affect vehicle buyers

2. How tariffs will affect dealerships and manufacturers

3. The potential impact of changing a significant trade industry

How Will This Affect Buyers?

The risks of not reaching a deal or reaching an undesirable one are especially high. While unfortunate, many OEMs (original equipment manufacturers, such as vehicle brands) pass on increased costs of distribution and production chains to buyers. This could mean that buyers will see increased prices for both new and used vehicles. The increase starts at the point of the new vehicle purchase and is carried on throughout its life.

To avoid the possible increases in price, shoppers are rushing to purchase sooner rather than later. Those who are on the fence or potentially looking to upgrade or purchase a new vehicle should consider making their purchase decision before the impact of potential tariffs and fees becomes reality and costs increase. If you fall into this category, you can browse our inventory today.

How Does This Affect Dealers and Manufacturers?

Manufacturers and dealerships are more closely tied together than we often think. If the costs of manufacturing increase, vehicle prices will likely increase. If prices increase, demand may decrease. If there is less demand, there may be less overall need for vehicles and parts, which would mean fewer jobs required to produce and higher costs to do so. While these concepts are no guarantee, they are serious concerns for both dealers and manufacturers alike.

What we do know in regards to NAFTA changes is that there is the potential for president Trump to pull out of a three-way deal with Canada and Mexico if our government doesn’t agree to certain points. If this happens, this is when we would start to see the true impact of the chain above.

Trade Industry Considerations

Trade, as it pertains to automotive, is a large industry around the world. When it comes to Canada and the US, the stakes are high. CADA, the Canadian Automobile Dealers Association, cites that over 80% of parts and manufacturing is exported to the US, and the total price is over $150 billion dollars. Putting tariffs on vehicle manufacturing and parts could inhibit trade, reduce demand, and reduce job opportunities. NAFTA agreements have long been consistent, and this potential for change is not something that should be taken lightly.

CADA and pillars throughout the automotive industry are encouraging individuals and businesses alike to reach out to members of parliament to encourage the Canadian government to reach a deal. We encourage our dealer counterparts and everyone involved in the chain of distribution to reach out to their local MPs to shift their focus to an area that truly needs it.



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