Automotive

Understanding What a Border Shutdown Could Mean for the Auto Industry

Immigration is one of the biggest polemics in today’s national conversation. The President’s threat to completely close the U.S.-Mexico border seems to have been revoked for the time being, according to TIME. Yet, the possibility of a border shutdown remains. Taking that action would have far-reaching trade consequences for multiple U.S. industries, including the automotive industry.

The United States is the second largest market for auto production and sales in the world, according to Select USA. In 2017, the industry is responsible for thousands of U.S. jobs, according to the report. But, the auto industry does not operate in a vacuum. The industry imports and exports vehicles, and foreign automakers play a big role with direct investment here in America. Like nearly all major industries, the auto business operates on a global scale.

With that global scale in mind, why would shutting down the U.S.-Mexico border have such serious implications for the U.S. auto business? The answer is in the parts. The United States imports approximately $59.4 billion worth of auto parts from Mexico, and exports $32.5 billion worth of parts to assembly plants in Mexico, according to CNN. The vice president of industry, labor, and economics at the Center for Automotive Research, Kristin Dziczek, told CNN that all U.S. auto plants need parts imported from south of the border. The essential supply chain would be disrupted, and U.S. auto manufacturers would struggle to make vehicles.

To give an idea of how much the U.S. auto industry relies on imports from Mexico, both NPR and CNN articles point to wire harnesses. Mexico is responsible for producing more than 70% of wire harnesses used in U.S. auto manufacturing, according to CNN.

How quickly would the U.S. auto industry feel the effects of a border closure? Experts seem to agree the consequences would be almost immediate. Senior economist with Cox Automotive Charlie Chesbrough told NPR “most of the industry follows a just-in-time inventory strategy.” This means most auto manufacturers in the U.S. would not have a stockpile of car parts to rely on while the border is closed. Experts quoted in the CNN article forecast that the U.S. auto industry would shut down within a week of closing the border.

For the time being, Chesbrough told NPR the auto industry has yet to become too concerned with the threat, considering how serious the implications are for the U.S. economy as a whole. While a complete border closure may not be imminent, the U.S. auto industry is feeling the increasingly tight border controls. Approximately 750 border agents have been shifted from commercial operations to immigration, and as a result, imports are facing delays, according to Reuters.

Trucks, carrying auto parts amongst many other goods, are lining up in hopes of getting across the border. “The situation in Ciudad Juarez is very serious because these auto parts go to plants in the United States and obviously they put at risk the operation in the United States,” Eduardo Solis, the president of the Mexican Auto Industry Association, according to the Reuters report.

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