O'Neil on North American supply chains and China transshipment (with David Westin)

Introduces Shannon O'Neil as director of studies at CFR, author, and Bloomberg contributor.

David Westin

Shannon O'Neil

The strength of the U.S. auto industry is really a North American auto industry. Cars and parts produced across Mexico, Canada, and the U.S. are strong, competitive, and affordably priced. Those supply chains are important for autos and all kinds of manufacturing.

Sets up the argument that integration is a feature, not a bug.

Asks if it's possible to cut off auto trade between the U.S., Canada, and Mexico.

David Westin

Shannon O'Neil

Without NAFTA/USMCA, would we have a North American car industry at all? We could bring back a U.S.-produced car, but it would be much more expensive, less innovative, and hard to compete against imports from Japan, South Korea, Europe.

Explains the cost and innovation penalties of decoupling.

Notes the U.S. trade deficit with Mexico ($200B) and Canada ($46B) and says Trump underestimates U.S. need for two-way trade.

David Westin

Shannon O'Neil

Mexico is now the number one exporter to the U.S., partly replacing Chinese trade. But Mexico and Canada are also the number one export markets for U.S. companies. We are very dependent on them as they are on us.

Highlights mutual dependence and the role of nearshoring.

Introduces China as a specter in USMCA negotiations.

David Westin

Shannon O'Neil

China is looming over all negotiations. Mexico has pushed back against Chinese imports. All parties are open to creating a real North America fortress vis-a-vis China.

Explains transshipment risk and the potential for a unified North American trade bloc against China.

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