background
The outcome of the US election is also important for German car manufacturers, because they like to produce a lot in neighboring Mexico. This is particularly a thorn in the side of the Republican Trump.
“I want German car companies to become American car companies. I want them to build their plants here.” Donald Trump said this a few weeks ago at a campaign event in the US state of Georgia. He threatened massive tariffs and the only way to avoid these taxes was for a car manufacturer to build the cars in the USA. A threat that makes German car manufacturers in Mexico eagerly await the upcoming US election.
Mexico is the German economy’s most important investment location in Latin America. In the past 15 years, the number of German companies based here has even doubled, now there are around 2,100. Among other things, the major German car manufacturers also have plants in Mexico: VW, BMW, Mercedes – and Audi: The company recently announced new investments in the field of electromobility.
Production record for German car manufacturers
Mexico is attractive for German companies, emphasizes the managing director of the German-Mexican Chamber of Commerce and Industry, Johannes Hauser. “Especially with the focus on exports to the partner countries with which Mexico has concluded free trade agreements over the last decades,” he explains. The agreement with the United States and Canada is particularly relevant. “Mexico shares 3,200 kilometers of border with the USA. 80 percent of Mexico’s total exports go to the USA.”
German manufacturers produced 716,000 cars in their factories there last year, setting a record, according to a spokesman for the Association of the Automotive Industry in an interview with “Welt” recently explained. In addition to the large manufacturers, hundreds of suppliers have also established themselves in Mexico. For the production of cars, individual components sometimes cross the border several times until a vehicle rolls off the assembly line in the USA or Mexico.
The US-Canada-Mexico Free Trade Agreement (T-MEC) makes it possible: an agreement that Trump even negotiated himself during his first term as president. Trump’s vision of reindustrialization of the US, if implemented, could be threatening to German car manufacturers, who actually had no reason to complain. Unlike in Germany, there was no talk of job cuts in Mexico.
Resettlement to the USA was anything but easy
But you don’t have to take Trump’s threats that seriously, says Hauser. On the one hand, the imposition of higher US import tariffs on vehicles from Mexico would mean a breach of the free trade agreement, and inflation would also rise. And even if a company were willing to establish itself in the USA, as Trump has in mind, the personnel issue could become a problem: Just like in Germany, there is a massive shortage of skilled workers in the USA.
“We are already noticing that German companies based here in the country have to lend staff to their sister companies in the USA in order to fill gaps,” says Hauser. “That shows to what extent this has become more dramatic in the USA.”
Independence of the judiciary in danger?
But it is not just the US elections that pose a new factor of uncertainty for German companies. In Mexico, former President Andrés Manuel López Obrador pushed through a controversial judicial reform shortly before the end of his term in office. This caused some unrest on the financial markets. It will most likely come into force next year under his successor Claudia Sheinbaum.
“For a German company and all others that already operate in Mexico, this means that if there are legal doubts, they may now have to undergo a different test and a different procedure than before,” explains Mexican economic analyst José Roberto Solano from the Monex financial group.
“Even for judges who would be selected under a different system, there is concern about whether their decisions will be balanced,” Solano continued. Because: In the future, judges should be elected by the Mexican people. Many observers fear that the independence of the judiciary – and with it legal certainty for foreign investors – is at risk.
“America First” is here to stay
There will be elections in the USA on November 5th. Kamala Harris or Donald Trump: In the end, both candidates would pose a challenge to the international market, says the Mexican economic analyst. “With Kamala Harris, there would potentially be greater trade cooperation and the issue of foreign direct investment would move forward more easily,” Solano said. However, Harris’ agenda prioritizes issues of security and the country’s trade environment.
“I think it would be a little easier with Harris, but there are also some challenges,” predicts the expert. In the end, current President Joe Biden also continued Trump’s protectionism and relied on “America First”. That would probably remain the motto for both candidates.
