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US auto plants would shut down within a week if border closes, economist says

Posted at 6:36 AM, Apr 02, 2019

The entire US auto industry would shutdown within a week if President Donald Trump goes through with his pledge to close the US-Mexican border, according to a leading expert on the industry.

That's because every automaker operating an auto plant in the United States depends on parts imported from Mexico, said Kristin Dziczek, the vice president of industry, labor and economics at the Center for Automotive Research.

About 37% of all auto parts imported to the United States originate in Mexico. Virtually all car models in America have Mexican parts, she said. Because of that reliance, she said the auto industry would stop producing vehicles relatively quickly.

"You can't sell cars with missing pieces," she said. "You've got to have them all. I see the whole industry shutdown within a week of a border closing."

President Trump is threatening to close the border within a week as a way to stop illegal immigration. Members of his own administration have told CNN that he has been warned several times about the economic consequences of a shutdown. One administration official described the effects as " catastrophic " and "a whole world of hurt." But the president continues to contemplate the idea of shutting the border in sections or in its entirety, according to officials.

The auto industry is particularly vulnerable to a border shutdown because it imports $59.4 billion worth of parts from Mexico. It also exports $32.5 billion worth of parts from US automakers and parts manufacturers to assembly plants operating in Mexico. Those exports could be shutdown as well.

When reached for comment about the impact of a possible border closing, Ford, GM and Chrysler referred CNN to a statement from Matt Blunt, the president of the American Automotive Policy Council.

"Any action that stops commerce at the border would be harmful to the US economy, and in particular, the auto industry," Blunt said. "Access to Mexico's marketplace and North American integration are critical to operations in the US."

Blunt said it's imperative that goods move across the US-Mexican border, and that's one reason why the industry supports the USMCA, the Trump administration's new trade agreement with Mexico and Canada that is designed to replace NAFTA.

USMCA is essential to maintaining the competitiveness of the US auto industry and we are urging Congress to pass it without delay," he said.

But closing the border could halt the very trade that the USMCA agreement is designed to regulate.

Parts makers that supply US assembly lines could shut down, because the auto plants don't have a place to store massive amounts of unused parts. So a shutdown of auto plants will ripple through the broader economy. About 1 million people work at US auto assembly and parts plants, according to Labor Department statistics.

Parts imported from Mexico are typically low cost, labor intensive components that don't make economic sense to build here, Dziczek said. She points to wire harnesses, the collection of wires that carry power throughout a vehicle. She said there are few if any wire harnesses made in the United States, and that more than 70% of wire harnesses come from Mexico. Much of the rest of the harnesses arrive at the US-Mexican border from countries south of Mexico.

"It's one of the first pieces you install when you're assembling a car," she said. "You can't build the whole car and slap the wire harness in later. This is a big critical part that shuts down the assembly line if you don't have it."

But she said there are many other critical parts, from seat belt anchors to engine components that also come from Mexico, and can't be replaced by US factories any time soon.