MEXICO CITY—For a soft-spoken stalwart of Mexico's auto industry, Guillermo Rosales is blunt when it comes to the frustrations his country has faced since President Trump reopened the North American Free Trade Agreement.
Foreign investment is stuck on the sidelines. Domestic car sales are falling. And every time there appears to be progress on the auto chapter of the talks, Trump's team changes direction, Rosales said.
"The very origin of the decision to renegotiate NAFTA, especially under high-pressure conditions that have impeded a successful conclusion, goes beyond economic interest," Rosales, co-director of the Mexican Automobile Distributors Association, told Automotive News. "Anything can happen, because this isn't about what makes sense economically."
Late last week, Trump further raised the stakes by launching a trade investigation in the name of national security that could lead to tariffs of up to 25 percent on imported autos.
The move, widely panned by U.S. industry groups, foreign auto makers and a bipartisan swath of politicians, was seen partly as a negotiation tactic to dial up pressure on Mexico and Canada ahead of a mid-June deadline that would have to be met for a redrawn NAFTA to make it through the U.S. Congress this year.
Trump blamed Mexico and Canada for the deadlock, saying they have been "very difficult to deal with" and "very spoiled." He made the comments just before floating the tariff on imported autos, which he said would be good for American auto workers.
The Commerce Department investigation Trump ordered into the car and light-truck trade falls under Section 232 of the Trade Expansion Act of 1962, which gives the president broad power to target imports if excessive imports are found to be a threat to national security. It's the same authority he invoked in announcing sanctions on imported steel and aluminum in March.
The moves have put the president at odds with many Republicans in Congress and the auto industry, who see the threat of tariffs shaking business confidence and the potential cost of tariffs for businesses and consumers undermining the economic gains promised by the tax cuts enacted late last year.
Meanwhile, United Automobile, Aerospace and Agricultural Implement Workers (UAW) President Dennis Williams said last week that he supports the Trump administration's efforts to launch the national-security investigation, calling the U.S. "a dumping ground for a lot of countries at a very low cost."
Some analysts said Mexico is unlikely to fall for the hardball tactics, particularly because the current U.S. proposal on autos is highly unfavorable and would insert a sunset clause that would phase out NAFTA within five years unless the pact was renewed by all sides.