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SETTING THE PACE IN AUTO: THINKING BIGGER THAN TARIFFS  
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Andrew Elrod
April 28, 2025
Labor Notes
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_ In 2023, for the first time in history, nonunion auto companies
out-produced the Big 3 in U.S. assembly, 4.9 million vehicles to 4.6
million. _

UAW members and allies rallied outside of Troy, Michigan, in 2023 at
the headquarters of VU Manufacturing after the company laid off and
blacklisted 400 auto parts workers in Mexico who made arm rests for
various auto brands. The repression came after the, Jim
West/jimwestphoto.com

 

President Donald Trump’s infatuation with tariffs dates back to the
1980s
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when he first said tariff was “the most beautiful word in the
dictionary.” On March 26 he announced “a 25 percent tariff on all
cars not made in the U.S.,” but exempted auto parts that comply with
the U.S.-Mexico-Canada Agreement, the successor to NAFTA.

For those parts, and for the 25 percent of U.S.-sold vehicles that are
assembled in Mexico and Canada, the tariffs will be applied partially
at an undisclosed date to only the non-U.S. part of the vehicle’s
value. Essentially, auto manufacturing is already so integrated across
North America that the administration has left carve-outs for Mexico
and Canada.

The president’s approach to the auto industry offers an opportunity
to clarify the goals of U.S. trade policy. To understand what is
really in the interests of working people, we have to separate the
president’s political whims from the changing contours of global
capitalism.

For politicians and auto executives, at stake is whether the U.S. auto
industry will be an appendage of a global market, or a North American
continental market, or a national market. Their aim, as always, is the
most profit possible, and they are indifferent to national boundaries.

But for the 12 million workers in U.S. manufacturing, the question is
whether it is possible, under this administration and in this moment
of twenty-first-century capitalism, to create a pro-worker, pro-union
trade policy.

The Trump administration’s focus on tariffs obscures the nature of
this problem. Despite the accumulated traumas of waves of partial
restructuring, the U.S. auto industry has spent most of the last 16
years growing. When jobs last peaked, in spring 2023, there were more
than 1 million workers producing motor vehicles and their parts inside
the nation’s borders. Yet most of this growth is in nonunion jobs.

In 2023, for the first time in history
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nonunion auto companies out-produced the Big 3 in U.S. assembly, 4.9
million vehicles to 4.6 million.

Whether Trump’s tariffs game will lead to a further growth of jobs
ultimately depends on the level of demand in the economy—on whether
people are buying cars. But it’s not difficult to understand why his
call for change has been received with enthusiasm among many auto
workers.

For 45 years, the automakers have used the threat of relocating to
compete on wages and on tax breaks. The multinational corporations
that control the industry increase, reduce, or eliminate production
across their networks of suppliers and assembly plants based on lower
costs and their political power over governments.

It is this power of the corporations to locate where they will that
has led the United Auto Workers to embrace Trump’s tariffs. But it
has been the competition between the union and nonunion parts of the
industry, under managerial prerogatives, that has ingrained fear in
the workforce and allowed the employers to set the pace.

Of the 14 U.S. assembly plants the industry opened between the passage
of NAFTA in 1994 and the financial crisis of 2007-2009, 10 were in
right-to-work states and one was in Indiana, which became
right-to-work in 2012. Three were in the union part of the industry.

TRADE RESTRICTION LIKE IT’S THE ’80S

The growth of nonunion auto in the U.S. during the 1980s was driven by
trade restrictions: deliberate government interference with “free
trade.”

Unable to sell into the U.S. market under Ronald Reagan’s import
quotas
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Japan, five Japanese automakers (Honda, Nissan, Toyota, Mitsubishi,
and Subaru) opened plants in the U.S. between 1982 and 1989, all
nonunion. Before Reagan, 75 percent of vehicles sold here were
assembled with union labor (the other 25 percent were imported). Ten
years later, the union share was down to 60.

This competition from foreign-owned “transplants,” combined with a
recession from 1979 to 1982 stretching across three model years,
forced profound changes in U.S. vehicle production. With consumers’
pocketbooks hurting and fuel costs rising, the transplants had an edge
because they were building smaller vehicles—and because they were
nonunion, with lower labor costs.

But most of all, the competition played out so destructively for
workers because the U.S. new vehicle market was, and continues to be,
saturated. The industry suffers from overcapacity: the auto brands are
capable of producing more vehicles than they could ever sell.
Overcapacity drives them to stiff competition, to search for lower
costs any way possible.

The transplants are mainly in the South and their pay and benefits
were significantly lower than in UAW plants until 2009. State
governments offer their owners huge tax breaks as enticements, forcing
local communities to sacrifice funding for K-12 education, parks, and
libraries.

It is the price competition between the union and nonunion companies
that drove the industry’s growth in low-wage but highly skilled
workers in Mexico.

CONTINENTAL INDUSTRY

This is the pattern of competition—between the Big 3 and the
transplants for a saturated market—that has driven the employers as
a group to transform auto manufacturing into a continental industry.
Production is integrated across national borders today, with 43
percent of all North American auto employment now in Mexico.

Understanding how trade policy has created this continental industry
is important for workers seeking to understand how trade rules might
be used to their advantage.

[ ]
 
More and more of U.S. vehicle manufacturing is done in "right-to-work"
states.
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While Mexican auto jobs have surged, U.S. auto jobs haven't really
plummeted overall—employers have cut union jobs and added nonunion
ones.
WHY THE BIG 3 WANTED NAFTA

NAFTA changed laws inside both Mexico and the U.S. Before, the U.S.
would charge a tariff on all the "value added" on products shipped
abroad for processing and imported back into the country. This meant
the maquiladoras (foreign-owned factories in Mexico) could not source
materials from inside Mexico. NAFTA changed this, so the maquiladora
plants became "full package" companies—more independent. Much of the
auto parts industry migrated to Mexico.

Meanwhile, once Japanese-owned companies began building assembly
plants in the U.S., Japanese-owned parts suppliers here also grew;
their number quadrupled from less than 50 to more than 200 during the
late 1980s.

Managers at the Big 3, having lost around 4 million vehicles in annual
sales to foreign-designed models, sought to close assembly plants and
adopt “lean” Japanese methods of supply-chain management. Between
1979 and 1991, the Big 3 reduced their number of assembly plants by
12, from 69 to 57, representing one-third of their capacity.

But the deepest effect of transplant competition—the U.S. firms’
motivation for pushing NAFTA—was in the parts industry. More than
1,000 different parts plants would supply the typical assembly plant
during the 1970s; by the 1990s the number was 700 or 800 per plant.

The goal was to get a larger volume of product from a smaller number
of assembly plants with fewer suppliers. In short: the entire industry
was sped up. The suppliers, as well as the in-house parts divisions of
both General Motors and Ford, all set up shop in Mexico.

FROM NAFTA TO BANKRUPTCY

For much of the twentieth century, the Mexican government—like the
rest of Latin America—limited foreign ownership and investment in
businesses within its territory. The pattern of foreign companies
siphoning profits to New York and London motivated these countries to
grow their own capitalists through trade protection to keep profits at
home.

The introduction of transplants north of the border began to change
all this. And the collapse of oil prices during the 1980s caused the
Mexican government to look for other sources of revenue.

The de la Madrid and Salinas administrations found eager allies in the
Big 3, reeling from their competition with the transplants. GM opened
its first maquiladoras in 1978, and in 10 years contracted with 15
companies operating 27 plants employing 20,000 Mexican workers. Under
the terms of U.S. trade law at the time, GM only paid customs duties
on the “value added” in Mexico—the company shipped components
from the U.S., assembled them into instrument panels, air and heating
controls, lights, seats, etc., and paid tax on the price difference,
which was only the meager wages paid in Mexico.

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By 1992, as Mexico loosened its investment laws, GM’s maquiladora
footprint had grown to 32 export plants employing 30,000 workers. This
was in addition to another 55,000 in domestic assembly plants for the
Mexican market—making GM the largest employer in Mexico. Chrysler
and Ford had 21,500 and 31,500 employees in the country.

While you might think the Big 3 wanted NAFTA in order to begin moving
to Mexico, in reality what they wanted was to stabilize competition in
the U.S. NAFTA provided protection for the incumbent automakers on the
North American continent who owned existing Mexican factories.

The only auto companies with factories in Mexico in 1994 were
Chrysler, Ford, GM, Nissan, and VW. These companies were exempt from
Mexico’s 30 percent content requirement; any other corporations that
wanted to open factories in Mexico were not. And in order to qualify
for duty-free trade, the industry was required to source 62.5 percent
of parts from the North American continent by 2002.This gave companies
like Honda and Toyota seven years to either start buying from the
North American suppliers or bring their own parts companies to open
new factories on the continent—where Mexico was the growing
geography for parts makers.

In those seven years, the U.S. Big 3 stabilized their market share of
U.S. sales for the last time. Earlier, the transplants had
concentrated on smaller cars. In 1999, Toyota began production of the
first Tundra full-size pickup truck—competing with the Big 3 on
territory they had seen as their own. All the growth in pickup sales
till 2004 was accounted for by new transplant trucks.

At the same time, NAFTA accelerated the restructuring of the parts
industry that had begun in the 1980s. GM and Ford, which had already
consolidated their parts subsidiaries, both spun them off in 1999,
creating Delphi and Visteon. By 2005, when Delphi declared bankruptcy,
the company employed just 33,000 in the U.S, down from 190,000 in
2001. The transplants opened 11 more plants while employment at the
Big 3 fell from 600,000 in 1990 to 300,000 in 2006. With the
bankruptcies of GM and Chrysler during the financial crisis three
years later, the Big 3 downsized from 250,000 to 170,000 jobs (salary
and hourly) in two years.

NEW TRADE PACT

Across liberal and conservative administrations, the U.S. has been
trying to “manage” trade for decades. Republican George H.W. Bush
designed NAFTA and Democrat Bill Clinton championed it and signed it.
But the underlying problems of excess capacity and fierce competition
didn’t diminish. If anything, NAFTA and the neoliberal capitalist
regime turbocharged the overcapacity problem. These are questions of
managements' rights in shaping the industry, which the UAW had
challenged in collective bargaining most aggressively before the Cold
War. Having retreated from challenging the priority of profits and
giving workers a say in investment and pricing decisions, the union
was left with the politics of tariffs.

The negotiation and passage of the USMCA, NAFTA’s replacement, in
January 2020 marked the beginning of the current phase of auto
politics.

The USMCA strengthened NAFTA’s continental protectionism, but now
against China rather than Japan and Europe. It established a
continental auto minimum wage of $16 per hour, raised “regional
value content”—the North American content the vehicle must have in
order to qualify for duty-free trade—from 62.5 percent to 70
percent, and prohibited members from entering into trade agreements
with “non-market” nations, meaning China.

This was because management had given a growing role to Chinese
factories in supplying the Mexican market. Though Mexico assembled
over 3.9 million vehicles last year, just 500,000 of them were sold
within the country.

GM’s global structure shows how this works. Of 889,000 light
vehicles GM assembled in Mexico in 2024, 831,000 were for
export—717,000 to the U.S., 95,000 to Canada, and the remainder to
Latin America, the Caribbean, and the Middle East.

At the same time, GM sold 205,000 cars in Mexico that year. Joint
ventures like GM-SAIC in China meet this demand; of GM’s 175,000
imports to Mexico, 132,000 were from China.

The USCMA’s most innovative departure from NAFTA is its “Rapid
Response Mechanism” (RRM) for labor disputes. This is a committee of
representatives of the three nations empowered to hear complaints
about labor-law violations at individual establishments and submit
cases to the respective national governments for enforcement.

Though only the nations can bring complaints, and those complaints
must address violations of labor law in the countries where they
occur, the recent strengthening of collective bargaining rights in
Mexico—requiring member votes on union contracts and secret-ballot
elections for union leaders—has enabled workers in that country to
use the RRM successfully to build power in two dozen facilities.

Because the text of the RRM annex includes a broad carveout for the
U.S, U.S. workers have not been able to use the Rapid Response
mechanism.

WHAT MIGHT TARIFFS DO FOR U.S. WORKERS?

Trump’s project of creating a domestic market with domestic jobs
through tariffs alone will not solve the Big 3’s problem of
competition from nonunion firms, nor eliminate management’s
prerogative to exploit nonunion labor to compete for sales. Whether
sales will grow will depend in part on what the government does—and
Trump seems willing to head the country into a recession.

Neither is it likely that tariffs will open production and
plant-location decisions to participation by the UAW, at least without
a massive campaign to organize nonunion auto workers. Reducing
employers’ ability to discipline the union by moving production
around is a worthy goal. But tariffs will only alter one element of
this calculus—leaving out of the equation the equally important need
for a healthy, high-demand economy.

Furthermore, if Trump’s current National Labor Relations Board has a
say, large-scale organizing will be unlikely to succeed. His nominee
for NLRB General Counsel is a management-side labor lawyer from Morgan
Lewis, the law firm representing SpaceX, Tesla, Apple, and Amazon in
their suits against the constitutionality of the NLRA. Trump has made
clear his hostility to unions, ending collective bargaining rights for
700,000 federal employees with a stroke of his kingly pen.

Wresting control of the industry from this alliance of top corporate
management and anti-union politicians would require a militant
movement, armed with political education, pressing the case for
seizing control of the industry on the question of management rights.
It would have to be based on a labor culture of confidence, rather
than the fear that drives protectionism. It would need to raise
aspirations: that labor should control, not merely limit, the plans of
corporate employers.

Such confidence is difficult these days. But before Trump was elected,
the UAW had begun taking steps toward building this culture.

CONTROLLING THE INDUSTRY REQUIRES MORE THAN TARIFFS

Empowering an independent RRM, capable of receiving complaints from
workers themselves, and most importantly settling disputes on a scale
larger than a single establishments, would be a way of using trade
negotiations to strengthen workers’ power: a continental labor board
on the side of workers.

Before the Cold War, the U.S. labor movement long aspired to control
trades and industries on international lines. Achieving this on the
North American continent would require the growth of militant unions
in Mexico interested in coordinating bargaining demands with workers
in the U.S. A continental labor board could provide a framework for
shared bargaining rights that would make such coordination possible.

Including tariffs in a program to grow the U.S. auto industry is
possible to imagine: Determine the price increase that would be
necessary to make it profitable for U.S. producers to produce
domestically, and adjust the section of the tariff code accordingly.
The U.S., after all, has had one of the lowest barriers to auto
imports of the developed world for three decades: the European Union
charges 10 percent; during the 2000s, China imposed duties of 14 to 28
percent. Even President Obama imposed a three-year tariff increase on
Chinese tires from 2009 to 2012.

But where such ambitious economic planning has been undertaken,
tariffs have been just one component of the larger program of
controlling the corporations. Tariffs did not work by themselves.
Countries as different as Brazil and China built up their auto
industries by requiring domestic content for assembly, just as NAFTA
and USMCA require continental content. Brazil created an auto industry
in 20 years by limiting imports through tariffs and then regulating
the hell out of the corporations with taxes and domestic-content
requirements.

In the U.S., the most obvious way of forcing the industry to grow
would be lowering its prices and limiting its profits. Banning stock
buybacks, taxing excess profits, and raising individual income taxes
on senior managers would force corporations to reinvest their
earnings, since they couldn’t pay them out any other way. This
creates jobs. Another possible policy would be to institute U.S.
content requirements. And the classically New Deal approach of helping
the union to set the industry’s wage floor is the obvious starting
point of pro-worker economic planning.

Such a vision for the industry is far from Trump’s mix of anti-union
open shop, economic nationalism, and ugly anti-Mexican rhetoric.

When the federal government stepped in to the Chrysler and GM
bankruptcies in 2009, it did the opposite of using government power to
impose more pro-worker controls. Instead it gave the companies free
rein to slash jobs and cut wages for new hires in half—under the
assumption that restoring profits was the main goal. That was followed
up by legislatures in the heart of the old auto country passing
right-to-work laws—Indiana (2012), Michigan (2013), Wisconsin
(2015), and Kentucky (2017).

This alliance reveals ruling-class assumptions about how the auto
industry must be run—maximum profits above all else, with weak and
non-existent unions. Tariff protection promises to raise costs but
says nothing about prices. This is good for U.S. workers, who are
those costs. But for workers across the continent, anti-union managers
will be emboldened if sales continue to slump.

Going further and changing those assumptions must be at the heart of
any project to reorganize the industry. As the recession approaches,
this should be top of mind for auto workers.

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_Andrew Yamakawa Elrod is a historian who studies wage and price
controls in the United States._

* U.S. Auto Industry; Tariffs; Globalism; UAW; US Workers;
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