Mexico has hit back in the verbal trade war with Donald Trump, hitting out at the use of “fear or threats” to deter companies from investing in the country.
The US president-elect has threatened to slap import tariffs on US automaker General Motors for importing cars it makes in Mexico and Japan’s Toyota for planning a new factory there.
Ford also announced that it was cancelling a $1.6bn new factory in the northern state of San Luis Potosi that had been criticised by Trump, though the company said the decision was business-related.
Without mentioning Trump or any government, Mexico’s economy ministry nonetheless said in a statement that it “categorically rejects any attempt to influence the investment decisions of companies on the basis of fear or threats”.
Trump has vowed to renegotiate the North American Free Trade Agreement (Nafta) with Mexico and Canada as well as impose tariffs on companies that ship jobs out of the United States.
“The investments that are made in Mexico, the United States and Canada benefit the three countries thanks to the integration of our chains of production,” the economy ministry said. This, the statement said, did not cause “the loss of jobs for any of the participating countries”.
Ford’s abrupt move to scrap its $1.6bn plant in San Luis Potosi has sent shockwaves through the factory’s likely network of suppliers. Many of them had already started to expand in anticipation, in a state where industry is “easily 70%” dependent on the auto sector, according go Julian Eaves, managing director of Preferred Compounding de Mexico, a US-owned maker of rubber compounds operating in central Mexico .
“It’s going to have a huge impact on the local community,” said Eaves, calculating the loss to the economy could run into the hundreds of millions or billions of over the next five years, as manufacturing, contracting and indirect jobs all fall short of plans.
In a matter of days, Ford’s retreat has turned the factory site into a barren plain bereft of its economic promise. “It now looks like a cemetery,” said Fernando Rosales, 28, a hydraulic hoses contractor preparing to abandon the site. “[There is] only death here, we are all leaving.”
Ford’s decision also puts the brakes on Detroit automakers’ push to build small cars in Mexico to reduce labour costs while using higher-paid US workers for larger, more expensive vehicles.
Not far from the doomed Ford site, other major players from the global automotive industry are in the midst of multi-million dollar investments, including General Motors Co, which Trump has also repeatedly berated for investing in Mexico.
German carmaker BMW is assembling a $1bn plant, and a few miles from the Ford site Goodyear is busy building a $550m tyre factor.
The US president-elect’s broadsides against Mexico have shown how exposed companies in the supply chain are to the whims of US automakers under pressure not to offshore production.
Shares in Kansas City Southern, one of the main railroad operators in Mexico, fell following news of the Ford cancellation and have lost 3.3% since Tuesday morning.
Between 40 and 50,mostly foreign-owned suppliers had been ready to come and supply the San Luis Potosi plant, said Sergio Resendez of real estate broker Colliers International.
“This was going to catapult us,” Gustavo Puente, the state economy minister of San Luis Potosi, said of the plant Ford originally announced in April of last year. Ford told him the plan was off about an hour before it went public with the news, he said.
Around 12 to 14 of the suppliers had already invested money buying land or signed a contract with developers, said Resendez of Colliers, though Puente suggested the number was fewer.
“It’s a very, very complicated hole,” Resendez said. “The suppliers, depending on their level of advancement, will lose money. They had already made big investments.”
At the Ford premises shocked and dejected workers packed up construction materials and prepared to leave. “This is a massive kick in the teeth,” said Rosalio Rocha, 52, a construction worker on the site from a nearby town.
“It looks like he is going to keep going on about it,” he added, referring to Trump.
Some of the ground at the 280-hectare site had already been levelled and the skeletons of two large white buildings stood out against a rusty brown and green backdrop.
Workers said they had heard plans for an industrial park opposite the site for suppliers had also been suspended. The park’s developers were not immediately available to comment.
The auto sector is at the heart of a Mexican industrial boom since the 1994 Nafta agreement.
“It hurts because we’re partners in trade, culture, sports, we’re partners in everything,” said Puente, the San Luis Potosi economy minister. “It hurts because [Trump] is pushing a policy that wants to break those ties.”