The automotive production installed in Mexico, as well as the plants that are currently under construction, would have a kind of "insurance policy" that would reduce the impact in case the US government does impose tariffs of 25% on vehicles under the rule known as Section 232, Mexican Minister of Economy Ildefonso Guajardo told The Wall Street Journal (subscription required).

This statement comes after a report by Reuters which states that there will be a cap for auto exports from Mexico to the United States.

While the official acknowledged that there will be a cap, he said it will be well above the current export levels, which would provide room for growth, although he refused to give specific figures since the negotiations are still on the bargaining table.

Guajardo clarified that in order to have access to the US market without paying tariffs, the cars must comply with the new norms, such as 75% of content from the NAFTA region and 40% of content produced in areas of US$ 16 hourly wages.

However, he reiterated that 70% of vehicles will comply with these provisions when they enter into force in 2020, while the remaining 30% will pay a 2.5% tariff until they comply with the new rules.

MexicoNow

Related

- Report: Mexico’s auto exports to the US would face a 2.4 million units cap

- New NAFTA auto rules won't be as disruptive as expected, analysts say

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