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it's become one of those unassailable truths about manufacturing Mexico is winning because of cheap labor but what if that's not entirely true now a recent Bloomberg article by David Welch and Dave Merrill presents some pretty compelling evidence that it's not low labor rates that makes Mexico hyper competitive now in the article well Chimaira used the $25,000 midsize car as a typical example overall hourly compensation in arles assembly plants is approximately 30 percent lower from Mexican workers compared to the u.s. now for that mid-sized car this amounts to about $600 per vehicle the article notes however the Mexican infrastructure is poor adding three hundred dollars per car and additional shipping expenses for vehicles shipping to Europe and an extra $900 for US bound vehicles the net cost advantage per car works are approximately 300 bucks so what are those other factors well welch and merrill note that automakers can save $1,500 per car using cheaper mexican parts Alysha savings which come from lower mexican wages but also because many parts are imported into Mexico tariffs free from Europe and Asia it's $4,300 per vehicle cheaper to build in Mexico and shipped to Europe compared to US production because Mexico has a trade deal with the European Union now most of Mexico's auto exports still come to the u.s. and Canada tariffs free under NAFTA with Mexico sending some 2 million cars a year into the US that's over half of Mexico's total auto production but the article states that by 2018 28% of Mexico's production will go to non nafta countries and that's up from 18 percent in 2015 the problem is exacerbated by major automakers desire to switch to global vehicle platforms one plant may be expected to produce vehicles from multiple markets we a distinct advantage to jurisdictions with multiple trade deals in place globally there's lots of money on the table in 2014 automakers avoided approximately 770 million dollars in tariffs by building in Mexico rather than the u.s. now during this campaign Donald Trump called for a 35% tariff on autos produced in Mexico the paradox of Trump's made-in-america strategy however is that to make it work for car makers the US will need low or no tariffs trade deals with major economies in Asia and Europe now that automakers are truly global producers protectionism just doesn't make sense from a major manufacturers standpoint so how will he boost the auto making jobs in the US he'll have to tackle the tax and regulatory environment and do it fast before rapidly advancing automation makes the entire issue irrelevant repatriating a billion-dollar platen they only add a few dozen jobs in the future that's a low political rate of return in any congressional district