Swiecki said a 35 percent tariff is unlikely to play out because it would probably be implemented as an emergency measure, and under World Trade Organization rules temporary protectionist steps can only last for 150 days. A more realistic scenario is that the U.S. government grants Mexico "Most Favored Nation" status, which would increase tariffs between 2.5 percent to 3.5 percent from zero today.
The auto industry is global and most likely will substitute Mexican vehicles from another location in the world
NAFTA is incredibly important for the U.S. economy and its export capability, Russell said.
But even if Trump is willing or able to renegotiate NAFTA, the new terms will take time to go into effect. Once the trade community is notified about the changes, each government will need to update its automated customs systems with the new trade rules, and industry will need time to update trade management systems and compliance software
If Congress, for example, repealed NAFTA, companies would simply revert to claiming duty exemptions for unaltered U.S. components in imported finished goods under the 9802 provision of the Harmonized Tariff Schedule. Duty is only paid on the value-added Mexican labor, overhead and materials. A number of companies, to this day, especially in the textile sector, still choose to take advantage of the 9802 provision over NAFTA trade preferences, Russell said.
A number of companies, to this day, especially in the textile sector, still choose to take advantage of the Harmonized Tariff provision over NAFTA trade preferences