Auto Stocks Have a Lot to Lose Under Trump

President-elect Trump will improve manufacturing, but it's going to take some real effort

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Auto sales indeed reached an all-time high in 2016, with December setting a monthly record. One thing is for sure, though: the “peak car sales” theory and subsequent crash look like folly now.

But let’s circle back to Trump’s main reason for his Twitter snipe: American jobs and trade. Trade was the big economic issue of the 2016 presidential campaign that propelled Trump to the White House. Thus far, he has taken on countries and companies that many feel have conspired to enrich themselves at the expense of the American worker.

Trump has vowed to renegotiate the North American Free Trade Agreement, more commonly known as Nafta, which was implemented in January 1994.

The agreement has allowed auto manufactures to move production to Mexico without facing tariffs, but with the president-elect now proposing a 35% tax on goods made by companies that shift manufacturing abroad, the auto industry has a lot to lose.

Of course, there are additional issues for the industry, which would be placed between the proverbial rock and a hard place if forced to choose to only build in America. Consider this: Ford’s new electric vehicle plant is only expected to create 700 jobs. That tells me that a lot of robots or computers are going to be “hired.”

In the end, I do believe Trump’s efforts will improve manufacturing, but it’s going to take a combination of carrot-and-stick.

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Article printed from InvestorPlace Media, http://investorplace.com/2017/01/trump-eyes-auto-and-trade/.

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