The price of a small car could increase $322 to $627 if the United States agrees to a new free trade deal with Mexico and Canada.
Mid-size car prices could rise $105 to $231, while pickup trucks could cost an additional $151.
Those figures, derived from separate estimates by the government’s International Trade Commission and Kelley Blue Book’s averages of new car prices, reflect the anticipated spike in consumer prices if the U.S.-Mexico-Canada trade agreement is approved.
The potential price jump is a concern among those skeptical of the deal as Trump administration officials make a strong September push to convince reluctant congressional Democrats to support the agreement.
It was unclear whether the United Auto Workers strike against General Motors would have an impact on Washington’s trade agreement talks, though most issues involved in the General Motors-UAW dispute appear not directly tied to the trade pact.
But there was little doubt that if the U.S.-Mexico-Canada trade agreement went into effect, “car prices will go up,” said William Reinsch, international business expert at the nonpartisan Center for Strategic and International Studies.
Under the agreement’s rules, a certain percentage of a vehicle would have to be built by workers making at least $16 an hour. And a higher percentage of a vehicle’s parts and other material would come from North America.
The International Trade Commission estimated in an analysis earlier this year that in the automotive sector, small car prices would be most affected because they tend to use more items from outside North America.
The ITC estimated that 88.1 percent of North American production of small cars would “experience a direct cost increase.”
As a result, the commission said, “it is more expensive for manufacturers to bring those vehicles into compliance.”
At the same time, domestic vehicle production is likely to drop as the United States exports fewer vehicles to Canada and Mexico and consumers balk at the higher prices.
Based on ITC estimates:
▪ Small car prices could go up 1.61 percent. Kelley Blue Book says the average selling price of a small car this year is $20,000, with luxury small cars costing $39,000. That means a potential price increase of $322 to $627.
▪ Mid- to full-sized car prices could go up 0.42 percent. Mid-sized car prices this year average $25,000, with luxury models at $55,000. Possible increases could range from $105 to $231.
▪ Pick-up truck prices could rise 0.37 percent. Average price this year is $41,000, meaning the agreement could boost prices $151.
The predicted price increase adds another dose of uncertainty to the outlook for the trade agreement.
Many congressional Democrats, with a push from labor interests, want strong protection for workers’ rights and air and water pollution standards. They also are concerned about market exclusivity for certain pharmaceuticals and enforcement of the agreement’s standards, particularly in Mexico.
“All trade agreements need to have strict enforcement or else you’re just having a conversation. You’re just having a press release,” said House Speaker Nancy Pelosi, D-California.
There is growing hope in the Trump administration and among many Democratic leaders that differences are getting closer to being resolved.
“We’re on the path to yes,” Pelosi told House Democrats Wednesday at a closed-door caucus.
Rep. Bill Pascrell, a New Jersey Democrat and a senior member of the House trade subcommittee, said the impact on prices is “an area where they (negotiators) are very sensitive in trying to see what the consequences are. I think we’re working hard on that.”
Supporters of the agreement advise not to worry about higher prices.
The American Automotive Policy Council, formed 10 years ago by General Motors, Ford and Chrysler, called the trade commission report’s conclusions “flawed, especially with respect to the automotive sector.”
It underestimates longer-term investments and increased use of U.S. auto parts “as a result of the certainty and predictability the USMCA will deliver,” said Matt Blunt, a former Republican Missouri governor and now the council’s president.
The trade agreement’s supporters urge looking at the bigger picture. They say the U.S. economy will prosper and more people will be working – and spending.
Mary Lovely, a senior fellow at the Peterson Institute, was not so optimistic, given the slowing economy. “The effect of the agreement is going to be swamped by whatever happens next with the economy,” she said.