Fiat Chrysler Automobiles and NAFTA’s Rule-of-Origin Clause

One of the most vocal opponents to the Trump Administration’s proposed changes to the North American Free Trade Agreement (NAFTA) is the automobile industry because of the impact they will have on the established rule-of-origin clause. The clause sets eligibility rules for free trade within the NAFTA region based on the percentage of a traded good’s components that derive from the NAFTA region. Our perspective on the issue is taken from the viewpoint of the Fiat Chrysler Automobiles (FCA) Corporation. President Donald Trump plans to increase the minimum required percentage of U.S. components from approximately 60% to 85%, to which the established automotive industry will not be able to adapt without sweeping and costly supply-chain and infrastructure overhauls. The Canadian Transport Minister has even begun open dialog with Michigan’s Governor to emphasize Canada’s concern over endangering the longstanding, highly integrated auto industry and supply chain connecting the two nations. This essay evaluates FCA’s current performance; it scans, assesses, and analyzes strategic factors to propose the best strategies for the company in the face of the proposed changes to the rule-of-origin clause.1 The Trump Administration’s position on NAFTA is widely criticized and if achieved will completely disrupt the auto industry and supply chain across the NAFTA member states. It has already created uncertainty among automakers, and many had to make swift changes to their business decisions in the wake of Trump’s 2016 election. Whatever happens with President Trump’s attempts to overhaul NAFTA, it is clear that there will be winners and losers. As it stands, the majority of automakers, including FCA, would say that there are more winners under the current NAFTA than they expect to be with Trump’s plan