Much of President Donald Trump’s tariff rhetoric has revolved around the idea of restoring factory jobs, especially in the auto sector, which he claims have been decimated by disadvantageous trade agreements like the North American Free Trade Agreement (NAFTA).
“American steelworkers, auto workers, farmers and skilled craftsmen … they really suffered gravely,” Trump stated during the rollout of new tariffs on April 2.
He characterized foreign manufacturers as “cheaters” that have “ransacked our factories” and dismantled the American dream.
Trump asserts that imposing a 25% tariff on all imported cars will raise costs enough to stimulate a surge of new auto plant construction and, consequently, create new auto jobs in the U.S.
However, the decline of auto jobs in the U.S., particularly in the Midwest, is a multifaceted issue that extends beyond trade deals and the offshoring of production to countries with lower wages.
American consumers have shifted their loyalty from domestic manufacturers to foreign competitors, driven in part by quality concerns over the years.
Moreover, automation has played a pivotal role in reducing the number of hours required to assemble a car, making it a critical factor in the ongoing evolution of the auto industry.
“What you see is that the real story in the auto sector is automation,” said Jason Miller, a business professor at Michigan State University and an expert on the auto industry.
The timing of this production shift to Mexico has drawn considerable attention from those opposed to the closures of assembly and auto parts factories.
Miller highlights that the automation wave contributed to substantial job losses during the same time that trade liberalization was occurring.
Despite the narrative suggesting a dire situation, the employment landscape is not as bleak as the president portrays it.
According to data from the U.S. Labor Department, there are actually more workers in U.S. assembly plants today than there were when NAFTA came into effect in 1994.
In fact, these factories produced roughly twice as many vehicles as Mexico and Canada combined last year, according to research from S&P Global Mobility.
Experts contend that trade deals rank as a distant third factor contributing to auto factory closures, trailing behind automation and the loss of market share.
Tariffs alone are unlikely to reverse these underlying trends.
As U.S. automakers have been losing market share, the problem has been exacerbated by their historical struggles with quality and design.
As Laurie Harbour, a partner at auto industry consultancy Wipfli, explains, the time to build a car decreased from approximately 50 hours in 1988 to just 18-20 hours by 2005.
Simultaneously, the Big Three U.S. automakers were facing a dramatic loss of market share.
“At the same time, the Detroit automakers were dramatically losing market share,” Harbour said.
The decline in dominance began in the 1970s, when more than 80% of U.S. car sales were attributed to General Motors, Ford, and Chrysler, which is now owned by Stellantis.
The trend worsened as competition from Japanese imports began to gain traction, and by 2007, for the first time, the Big Three accounted for less than half of U.S. sales.
By 2024, that figure is projected to drop to only 38% of the U.S. market combined.
The loss of market share has, in significant part, been self-inflicted, according to Patrick Anderson, president of the Anderson Economic Group, a Michigan think tank.
“There’s no question that deficient quality, uninspired design and bad labor relations of 20 to 30 years ago caused lasting wounds,” Anderson said.
He pointed out that although U.S. automakers have recovered much of their quality, they have failed to win back many of the customers lost to foreign brands.
Even as foreign manufacturers captured market share, they were also establishing their own plants within the United States.
However, not all auto jobs are created equal.
Many of the new facilities were nonunion operations located in lower-wage “right-to-work” states in the South.
Currently, the only notable exception is a Volkswagen plant in Chattanooga, Tennessee, which only voted to join the United Auto Workers union last year.
Last year, Asian and European manufacturers built approximately 4.9 million vehicles in U.S. plants, slightly outperforming the 4.6 million vehicles produced by Ford, GM, and Stellantis combined.
Furthermore, Tesla manufactured an additional 648,000 vehicles at its two U.S. locations.
This situation accounts for the increase in U.S. auto plant assembly jobs today, despite the dual challenges of automation and market share losses.
While assembly jobs have slightly risen above 1994 levels, a noticeable decline in auto parts employment has taken place.
This decline is significant, as nearly double the number of workers are involved in parts manufacturing compared to those engaged in final assembly.
Job losses in parts sectors can be attributed to the offshoring of production to Mexico, alongside automation in U.S. plants.
As new auto parts jobs followed assembly operations into nonunion states in the South, Michigan has lost half of its 220,000 auto parts jobs since the 1990s, while Alabama has seen a doubling of auto parts jobs.
It is undeniable that NAFTA spurred a significant increase in assembly and auto parts factories in Mexico.
Presently, nearly every major global automaker operates a facility in Mexico to cater to the American market.
Last year, Mexican factories assembled approximately 4 million vehicles and exported 2.5 million of them to the U.S. market.
Under NAFTA, and the United States-Mexico-Canada Agreement (USMCA) negotiated during Trump’s administration, manufacturers have been able to move parts and vehicles across borders as though the three nations formed a single market.
However, this scenario has also led to increased imports from Asia and Europe.
South Korea is currently the second-largest supplier of imported cars, shipping approximately 1.4 million vehicles to U.S. dealers, followed closely by Japan with 1.3 million, Canada at 1 million, and Germany far behind with 430,000 exports, all based on data from S&P Global Mobility.
Despite facing challenges, U.S. auto plants maintain a substantial presence in the North American market and are still significant players on the global stage, distinguishing themselves from other sectors like textiles and semiconductors.
In the past year, U.S. plants assembled 10.2 million cars, accounting for two-thirds of North America’s output, according to S&P Global Mobility.
This volume represents 55% of vehicles purchased in the U.S., with 1 million units being exported to other countries, including Canada and Mexico.
Production levels in the U.S. remain relatively stable, only down 14% since NAFTA’s inception in 1994, a period during which vehicle production in Mexico has surged by 272%.
Contrary to the rhetoric from the Trump administration, imposing tariffs is unlikely to lead to the return of foreign-based auto plants to the United States anytime soon.
“It’s a minimum of a two-year exercise to pull a plant out of Mexico and move it here,” said Harbour.
U.S. assembly plants that currently exhibit excess capacity may not have the capacity to start producing additional models that are now manufactured in other countries.
Reopening closed plants may also require years of effort.
Even if new plants are constructed in the U.S., they will likely need to be highly automated to compete with lower-wage facilities in Mexico.
“You will not see U.S. manufacturing employment numbers go back to the 1990 level due to automation,” Miller emphasized.
Notably, even officials from the Trump administration have acknowledged the role of automation in shaping future plants, indicating that new factories will require fewer jobs than those of the past.
“Here’s the key. Factories now can use robotics,” said Commerce Secretary Howard Lutnick in a recent interview.
“So American workers can be much more efficient with robotics. You’re going to see the greatest surge in … teaching people how to be robotics mechanics … it’s a great paying job and it requires a high school education.”
It is likely that parts production will experience a shift back to America before assembly plants, according to Harbour.
However, this does not entail a significant increase in jobs at the factories.
“I think you’ll see some job growth. I don’t think you’ll see a jobs boom,” Harbour concluded.
“It’s being portrayed to be much larger than I think it will be.”
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