Donald Trump’s election to the White House has thrown a lot of uncertainty in the U.S.-Mexico business relationship.
And that has executives on both sides of the border waiting to see how much of President-elect Trump’s campaign statements of major renegotiations to the North American Free Trade Agreement ultimately become reality.
“Once he becomes aware of the implications [of scrapping NAFTA], he may change his opinion,” said Carlos Pani, a former assistant commercial director of Pemex Petroquímica and now an industry consultant. “The United States has never been a protectionist economy.
“On some issues he’s backtracking, on the deportation of Mexicans and attempting to jail Mrs. Clinton, for example,” Pani said. “It’s too soon to be worried — but then again, will these things [trade-related threats] become a reality?
“The uncertainty over the next couple of months will be uncomfortable to bear,” he said.
Plastics industry executives warned of risks from sudden disruptions to complex, cross-border supply chains. Trump has also threatened to build a wall on the Mexican border and deport illegal immigrants in much larger numbers.
One senior executive at a major global auto components supplier, who asked not to be named, said for now the industry may sit tight on investment decisions.
“We don’t anticipate a change coming soon,” the executive said. “We’re continuing to invest in our factories” in Mexico.
But the executive told Automotive News, a sister publication of Plastics News, that he’s worried about the long-term prospects for NAFTA. His company has highly automated plants in Canada and the United States, while Mexican factories produce components with high labor content.
Workers at Mexican supplier plants earn $2.61 an hour, compared with $19.91 for the U.S. counterparts, according to the Center for Automotive Research.
If a Trump administration were to slap high tariffs on Mexican-made parts, the executive suggested some suppliers may have to move production to Asia to stay competitive.
“Our customers don’t want to pay more for U.S. content,” he said. “It could make us uncompetitive. We’d face threats from Asian suppliers.”
Metepec, Mexico-based plastics industry consultant Rangananth Shastri said that with so many multinational companies invested in Mexico it could be hard for the Trump administration to change matters.
“For example, in the case of Dow Chemical Co. they already have their structure here, as does DuPont [Co.], as do all the major resin suppliers,” said Shastri, who is also head of the plastics packaging section of the Mexican trade group Asociación Mexicana de Envase y Embalaje.
“In the short term there may be some uncertainty with the Mexican plastics industry. But in the long term I don’t see it [Trump’s threats] as a problem,” he said.
Likewise, Eduardo de la Tijera Coeto, a former president of Mexican plastics association Anipac (Asociación Nacional de Industrias del Plástico AC) and an industry consultant, urged a wait and see attitude until after Trump’s inauguration in January.