31st Annual Automotive Insights Symposium | The Forces Shaping Automotive Trade Geography

THOMAS KLIER: All right, I'm going to have to move this. OK. Good morning, everybody. Welcome back to the branch. And thank you, Rick, for this very, very kind introduction. It is bittersweet for me as well. But I'm an optimist, so I like to look at the upside of things. And I find it extremely gratifying and touching that the last major public event that I am able to participate in in my role after a 32 and 1/2-year run actually brings me back to the town where it all started many, many years ago.

So here we are talking yet again about trade. So as chair of this panel, let me take a few minutes just to frame things up a little bit. Trade is a Gordian knot subject. We've talked a lot about trade yesterday. Austan talked about trade and supply chain issues yesterday in a speech. And of course, the timing is such that, yes, boring, it is not.

When you think about the auto industry, it comes to mind always when you think about global industries. So trade is right there in the discussion, of course. And how does this usually manifest itself? The mass producers are global companies. What does that mean? They're active in all major markets around the world. That's pretty obvious.

But the part that people often don't think about is also very much related to that aspect. It turns out that motor vehicles are the classic weight-gaining good. That is to say, they typically are produced where they are sold. No global how the producer is. If you're active in North America and you have scale to justify at least 1 assembly plant, you produce the vehicles you sell in North America in North America. So there's a heavy regional component to this particular industry, as global as it is.

And that shifts the focus right on the region we're in, which is North America. And those are the 2 threads that are being reflected in this panel. It would be a miss for me not to point out that when you talk about trade with an auto in North America, from where we are right now, we can't see it because the back windows are grayed out, but if you imagine turning around, walking onto the patio, you actually would have a visual of the most important border crossing for this industry on this continent.

The Ambassador Bridge is being replaced at the moment with the Gordie Howe Bridge, which is supposed to open later this year, I think, in November. It looks gorgeous already. So that's as close and personal as it gets for people in this room and in this industry when we talk about trade. This is not a boring and not an irrelevant subject. It is hugely important.

So how are we going to spend the next 75 minutes or so with this topic? Let me do the following. First, let me introduce our 3 panelists. And then I'm going to just frame up how and why they are on this panel in terms of what they're talking about and how this relates to what I just said. Excuse me. And then they all get their turn at the podium with their slides, 1 up, 1 down. We will sit up on the podium.

And at that point, you come in, because at this point, you will have submitted many questions through the portal. And we'll have hopefully plenty of time to have a good discussion with you all. And we have a sharp stop at 11:30. And then there'll be another meal, believe it or not.
 
So in the order in which my colleagues will start soon after I'm done here, there is David Coffin, who is at the International Trade Commission, where he's been since 2010, I believe. And there he's responsible for the automobile industry. David is going to take the global view as the industry moves toward electrification. Critical minerals and batteries is front and center. So that's the most global presentation. That's why we put him up front.

He's followed by my dear friend and colleague Kristin Dziczek, who needs no introduction. Kristin is focusing the discussion back to North America, looking at what's happened since USMCA was put into place, and if you can see anything in the data.

And following Kristin is a long-time colleague and friend of mine. This does sound like the highlight reel of my 32 years, but it's not. This is Jim Rubenstein, who is an emeritus faculty at Miami-Ohio. He taught me everything I know about geography. And he is talking about something that he and I have been working on recently, which focuses on the supply chains of 1 specific important item that goes into motor vehicles, which is internal combustion engines.

And that's how it all fits together. I'm going to go quiet now. I'm going to call up David. The floor is yours. And let's see what you got to tell us.

DAVID COFFIN: Thank you. So as Thomas mentioned, I'm David Coffin from the International Trade Commission. We are a small, quasi-judicial federal agency-- ITC, quasi-judicial. It sits in a weird place-- 6 commissioners that are appointed by the president. There's nothing in between. We are not the international trade administration, which is a part of Commerce.

I see Sue laughing because in her time at Commerce, I'm sure she is familiar with the difference. But anyway, I'm getting lost on things that are less important for you all. But the ITC, we're independent, and we provide fact finding information to the executive branch and the legislative branch on the effects of trade policy on the US economy and competitiveness.

I cover automotive. So my focus is on the effects on the automotive industry. And similar to my Fed colleagues, the opinions that I'm expressing today are my own, and not necessarily those of the commission, or any of its commissioners.

Also, I want to note the age of my data is fall of 2024. And I don't have any full year 2024 numbers. A lot of this is changing really quickly. And I wish I had the full year 2024, because I think there have been some shifts even in that 1-year time frame. But unfortunately, trade data actually will be published probably next week for full year 2024.

So today what I'm going to talk about, I'm going to start off pretty basic, why EV batteries are important, and where we get them from. And then I'm going to continue up the supply chain. I'll talk about battery components and our trade in battery components and investment in the United States in those components. And then I'm going to do the same thing for critical minerals, going a little farther up the chain.
 
So why are batteries important? Well, they're important for the competitiveness of EVs. They determine the range. They have a big impact on cost. Also, if you look at the regulatory rules, whether that's USMCA or the Inflation Reduction Act, they have battery-specific rules for you to get the EV incentives or duty-free treatment in the case of USMCA. And with the Inflation Reduction Act, not only are there battery rules, it goes farther up to the components and the critical minerals. So that's the regulatory environment acknowledging the importance of the battery to the vehicle.

And finally, I think another important reason to be following batteries is that currently our demand is greater than our supply. And so we've been importing batteries. Globally, China is by far the largest producer of batteries. It's something like 3/4 of global capacity is in China. However, when it comes to the United States and North America-- again, this is the 2023 numbers-- about 2/3 of what we consumed for production of vehicles here in North America is actually from North America.

And actually, when it comes to batteries, that's really the United States. I don't think there was any non-US battery production online at that point. And then China was number 2. Japan was number 3. Korea was 4. And it says rest of world, because that's what the IEA data said. So I didn't change anything. I'm pretty sure that's EU cells, which have been imported over as a few different producers have needed those as they wait for the US production to come online.

The good news when you're looking at this cell perspective is that this is probably as reliant as we are ever going to be on imports for batteries. There is a lot of production coming online. And here in this data, these are stated capacities, which I want to say that pretty clearly for the people who don't follow batteries very closely. My understanding is-- I am far from an engineer or battery chemist. My understanding is it takes some time to get from, "Hey, we're making batteries," to "We're actually able to make the amount of batteries that this plant was designed to have a capacity for."

So stated capacities are really important to follow, but you may notice a really big difference between the operating stated capacity and last fall, and what was actually produced the previous year. It's almost 100 gigawatt hours. Why the big difference? Part of it is a number of those plants that had come online aren't yet able to reach their stated capacity. And typically, that's a 3-year process.

But it's not like building a building, where you finish the building, and you go, oh, we're done. You're continually producing and realizing kinks in the process and fixing those, and finding new kinks. And it makes me happy that I don't have to go through that. It sounds not all that fun, to be honest.

And so these are in gigawatt hours. I know for me, gigawatt hours isn't always intuitive. So I've kind of translated here to basically 1 gigawatt hour would be roughly 10,000 battery electric vehicles with a 100-kilowatt-hour battery. That number that I use to convert, I continually keep having to change because we keep using bigger and bigger batteries. A couple years ago, I was using 60, but now there are 200-kilowatt-hour battery electric vehicles out there. So you can quibble with my conversion rate, but in general, if we're going with that 100- kilowatt hours, what we have for stated capacity that's operating now would be about 1.5 million BEVs worth of battery, and then we have another 5.4 million worth that's under construction, and then another 4.4 million that has been announced, but they haven't broken ground yet.
 
And the reason I separate those things out, if you were listening yesterday, there was a lot of talk about pulling or unpulling policy levers that incentivize battery electric vehicles. And so I think manufacturers are watching that very closely. And so the farther out the production is, the more those plans might change, whether that's shrinking, or pausing, or delaying, or even stopping. So the production that's supposed to be online this year is probably not going to change significantly. That that's a little farther out might change, and then announced has even more of a possibility of seeing change occurring.

But aggregating all those numbers together, you see pretty clearly that that's more than enough for a market that sold 1.1, 1.2 million-- I think it was 1.1-something this last year in terms of battery electric vehicles. So even as we're seeing growth, there's space for that growth over the next couple of years.

Before we go deeper into the supply chain, I think it's good to at least see a simplified representation of the supply chain. As Thomas mentioned, the cars are classic weight-gaining goods. The battery fits in well with that. The battery packs are big and heavy. And because of that, not only do you build a vehicle where you're going to sell it. You assemble a pack where you're going to make the vehicle or pretty close by, because these packs aren't shaped to fit very well in a container. So you don't really want to put them on container ships or things like that.

So that pack assembly tends to be relatively local. It's also relatively simple to the point where I think I could be taught to do it. I couldn't do it today, but that part, maybe. As you go farther up the chain, things become much more complex. Particularly at the cell stage, that's generally the highest value-added stage for the battery. And that is what we were focused on a couple of slides ago in terms of stated capacities. We're talking about cell production at that point.

And then cells are made up of a cathode and anode with a separator in between. And they're sitting in usually a liquid electrolyte solution. The cathode is generally the most expensive and most important of those kind of main components, which, if you're thinking about the minerals that go into those, it's the lithium, nickel, manganese, and cobalt that go into some of the cathodes. We'll talk about chemistries in a minute. I'll try not to go too far on those. I don't want anyone's eyes to glaze over. And then the graphite goes into the anode.

And then 1 of the other things happening these days is recycling. So those packs can be recycled. And a lot of those critical minerals can be reused in the creation of components. So real quick on ba-- well, sort of quick on battery chemistries. There's a number of different battery chemistries for those cathodes.

The lithium-iron-phosphate is the most-- probably-- well, not probably. I'm sure it's the most produced globally because it's the 1 most produced in China. It has a lower energy density and is a little more sensitive to temperature than some of the other chemistries, but it has the advantage of no cobalt, which is 1 of the more expensive and rare minerals that's used in the battery. And it can be cycled more. Just like with your phone or your laptop, as you're charging it and discharging it, eventually, that battery doesn't hold as much charge. Same thing happens with battery electric vehicles. And the LFP holds that charge better over that thousands or millions of cycles. I think thousands. Millions is too much.

Lithium-manganese oxide is a formulation that was used in the Nissan Leaf, but not used as often anymore. And then nickel-cobalt-aluminum is-- most of the Teslas up until a few years ago were using nickel cobalt aluminum. That's why looking at the graph, you see that NCA really high over 2018 to 2022. And it's lower cost than NMC, but better energy density than LFP.
 
And so when I talk about energy density, the importance of that is all about how much range you can pack into a battery with a given amount of weight. So lower energy density means you have a heavier battery, which you're constantly chasing. Being able to have range, you want your whole vehicle to be lighter, but your battery is heavier. It ends up being pretty complicated.

And then nickel-manganese-cobalt is, I would say, generally the most popular among Western vehicle manufacturers because it has that highest energy density. I'm simplifying a little bit here. Those of you that know more than I do on batteries will be aware that there's multiple different NMC formulations. And anyway-- but the trends on these LFP has been increasing. NCA has been going down. And NMC has been going up as well.

And those 3 trends have a couple of causes. 1, Tesla has been losing market share. And so that has led to some of that decline in NCA. And at the same time, Tesla and others have been switching, at least their standard range, so not their longer range 1's, but their standard range 1's to LFP because of the lower cost. And that energy density, while it's still not as good as NMC, has actually gotten a lot better over the last 10 years or so to the point where it's usable for even a relatively good distance. And then, as those battery electric vehicles from more traditional carmakers have come up for sale, that's where you're seeing the NMC going up.

So moving into the trade in battery inputs, we import a lot of battery parts. We don't import a lot of the stuff farther upstream. That's generally because we need battery parts to make batteries. And we don't make a lot of the components right now. So we don't need to import a lot of the components from elsewhere.

Unfortunately, battery parts is not a phrasing you saw me use when I was talking about the supply chain. That has to do with the way the trade data is organized. So your cathodes and your cells actually tend to fall in the same code in the tariff schedule. So I would love for that to change in the future. And if you all are curious about that process, I'd love to talk to you about it. But I'm not going to dig into that here.

But as we produce more cells, you'll see us importing more components. As we produce more components, we'll be importing more refined materials, and so on. And where are we getting those materials and components from? When it comes to refined and processed materials and battery materials, the majority of it's coming from China. They have huge processing capacity and component production capacity.

However, if you look at battery parts, the majority of it actually doesn't come from China. Part of that has to do with tariffs that have been in place. It also has to do with the relationships that battery manufacturers here have. If you look at most of the battery production we have here, it's joint ventures from Japanese and Korean companies. And they're likely using the same supplier ne2rk that they use to produce in Japan or Korea, which would be importing from Japan and Korea.

However, raw materials we don't import very much from China. That's for the reason Kristin stated yesterday, which I'm going to steal and use liberally, which is rocks are where rocks are. I like that. It's simple, easy to understand. I was trying to use phrasing like endowments and factors. And it just didn't work as well.

The good news is on the component side, just like with the battery and BEV investments that we talked about yesterday, there have been significant investments in components, particularly in cathodes. Unfortunately, I have these in dollar values. I looked at doing some of the conversion to try to, again, talk in terms of vehicles, but honestly, I wasn't very confident in my conversions.
 
A lot of these things, the amount of cathode that goes into a cell is going to differ quite a bit, depending on the cell. And so I'm giving you the dollar value numbers because I'm a little more comfortable with those, even though as we talk about those policy levers changing, that may also change the amount of dollar value that's going into those things. It at least gives us an idea of the scale and where the focus is.

A small disclaimer here-- you see the cathode 1's really large. That doesn't mean that we're enough investment in cathodes and not enough in the others. Some of it may be due to differing costs and how much a cathode plant costs versus an electrolyte plant and things like that.

Moving on to critical minerals, I have a graphic from the Financial Times here that does a really good job of painting that picture, which is that in mining, rocks are where rocks are-- stealing it again. And so China does quite a bit of mining in graphite and rare earths. However, they don't have any cobalt in the ground. And there's only so much lithium and copper there as well.

But in the refining space, China is dominant in all sorts of refining and processing. And if you were to change this over to look at who owns the production in those different places and the nationality of the companies doing the mining, the left, I think, would actually look a lot more like the right, with Chinese companies owning a lot of the cobalt and a lot of the lithium mining. And actually, on the refining side, a lot of that refining, even when it's not occurring in China, is Chinese companies, which, if you all are familiar with the Inflation Reduction Act and Foreign Entity of Concern rules, that would make it challenging to have Chinese-processed minerals. That presents a real challenge, because even if you are purchasing minerals that have been mined in Australia and processed in Australia, that processing might have occurred at a joint venture that is Chinese invested.

When it comes to our global reserves here in the US, we do have global reserves in a number of these critical minerals. But it's far from a large percentage. I will say, when it comes to global reserves, these numbers aren't necessarily fixed. As mining and the ability to get things out of the ground changes and the technology improves, those reserves can change, or they can discover new sources of mineral deposits. So honestly, the 2025 commodity summaries from USGS, I think, came out last week. And I haven't updated the numbers, but I'm curious if the lithium will expand.

There's a decent amount of investment in the critical mineral projects. These are what's currently online. But there's a lot more coming. And when people talked about deregulation yesterday, David Schwietert talked about that a decent amount. I think mining is 1 of those areas that there's actually going to be a big focus on improving that process, because it can take up to 10 years to go from buying a mine to actually getting the minerals out of the ground.

So finally, looking at reduced foreign reliance by the end of the decade, like I said, I think cell forward. We're going to be pretty independent and looking at components and refining. I think those areas are a little farther behind cells, but there will be more North American and US space there. Also, I'm going to flip through these really quick, but if you are interested in the research that I've done, or we have natural resources and energy folks at the commission, I think these slides are going to be shared. And I've got hyperlinks to more research on that space. Thank you.

[APPLAUSE]

THOMAS KLIER: Kristin, you're next. Thanks, David.
 
KRISTIN DZICZEK:
 
[INAUDIBLE] a lot of things there. My microphone fell.
 
THOMAS KLIER: Oh, yeah. It's behind you.

KRISTIN DZICZEK: Oh. I don't know if I can find that.
 
DAVID COFFIN: I got you. Hang on. Here we go.

KRISTIN DZICZEK: I was hiding my cord so well. I'm good. I can do it. OK. Try not to knock it off again.

So you can see why David's 1 of my go-to calls when I want to know about batteries and sourcing and all of that. And we've worked closely together over the years. I'm going to start with my disclaimer. These are my thoughts, not those of anyone else at the Fed.

My presentation is an overview of some of the work I've been doing examining automotive trade patterns. I'm going to work on exploring 4 questions. What's happened to the balance of trade employment production since USMCA went into force? Those were all goals of the USMCA to increase US employment production and reduce the balance of trade. Trade deficits were seen as very negative at the time.

We want to look at, have the sources of US motor vehicle imports changed at all? Have the sources changed? Then we have these rules that are much more stringent than they were before. Are people following the rules? And then have there been shifts to the USMCA region from other global sources? So we were getting things from someplace else. Now they're here. It's a little difficult because it's hard to tell what shifted from everywhere else to the US, because the codes aren't always the same. And it's-- yeah, I'm sorry. This is geeky stuff.

But the short answer to these 4 questions-- continued trade deficits? Yes. Lesser of continued trade deficits? And then the second question is, yes, sources have changed. And then lesser use of trade preferences? And yes, there have been shifts. So let's get into them.

I'm going to start with a quick review of what President Trump said about USMCA circa 2020. He said at the signing that the agreement would be large, significant, modern, and balanced. All countries would benefit. On the right, you'll see that USMCA was expected to support growth, employment, and investment. And I showed the data on those metrics in my opening remarks yesterday, or at least I talked about them in the case of investment.

In his presidential memorandum in this term, titled "America First Trade Policy," he's directed an evaluation of all US trade policies. And those reports are due no later than April. So the work that I'm doing of what actually happened, I think you guys are going to be doing some of this, and others, for reports coming out in April on what really happened. There is an interim, and into the USMCA there's built-in reports. The last 1 was 2023. So 1 is supposed to come out in July this year.
 
So it's a good time to look at what happened since entry into force. Boy, is this a complicated agreement. I am not going to walk through all of this. It's a complicated set of rules that began January 1, 2020. They were phased in over 3 to 5 years and are mostly in full force now, with the exception of some companies were able to have alternative staging regimes. And 1 of them goes through July next year.

So there are different categories here of components and parts and vehicles and different thresholds of what they had to phase up to for having USMCA sourcing in order to get a zero tariff for trade within the US. I'm not going to make you read those tiny, tiny footnotes, but I didn't feel like I could put this slide together without including those additional details that you can see when my slides are posted.

And of course, a lot has gone on in the intervening years since January 1, 2020, in the before times, as my son calls it. And these may have had independent impacts on our trading relationships. There's the phase-ins that I mentioned, the rapid response mechanism. That is a way-- because the WTO isn't really very functional-- a way of adjudicating trade disputes within North America. Of course, COVID. There were 301 and 232 tariffs put on primarily China, but they were on many of our partners for a while.

The Bureau of Industry and Security has put export controls on chips and things in the connected and automated vehicle supply chain. There's been this big move to electrify, not just battery electric, but hybrid plug-in, and everything else, everything. So that might shift our supply chains a little bit. And the IRA foreign entity of concern restrictions have been ramping up over this period of time as well, with increasingly stringent prohibitions on critical minerals and components from countries that are considered entities of concern, so China, Russia, North Korea. We don't get a lot from North Korea.

And then there's the purchase and production incentives, which Canada basically matched on the production side. And each of these factors could have a trade impact together, maybe even more. So it's going to take some time and deeper analysis to really tease out the independent impacts of each of these. But I want to start by what we do at the Fed, looking at data.

So the first question is, what's happened to balance of trade before and after USMCA went into force? On the top, those are my global charts. So that's the balance of trade overall in motor vehicle and parts bodies and trailers. And on the right is the rate of change. The bottom set of charts are just Mexico and Canada taken together. So you can see the trade deficits have continued to get larger-- and I did take these all to 2024 value, so that's the real value in 2024 dollars-- since 2020.

It's easy to pick out because there's 1 little shorter bar. And that's 2020 because, of course, the pandemic constrained production in that year. So you can see a recovery out of the pandemic. But the trade deficits continued to get larger. On the right, though, those bars after that big contraction are really tiny. So the deficits persist, but the growth rate has slowed.

When we look at outputs, employment-- and then I took employment divided by output, a crude productivity measure that kind of normalizes the output-- the employment for growth in the output. We see nominal increases since 2020, COVID contraction. The gray bar is when COVID-- is when USMCA is in effect. But the employment and divided by parts is negative. So you see that bright blue line on the far right chart is starting to go down, but that's a continuation of a trend that started before USMCA and before COVID.
 
Output, the net is positive about 36 billion. Employment is net about 47,000, not quite the promised 76,000 jobs that was in the initial proclamations about USMCA. And investment, which I didn't chart, far outstrips the 35 billion in new investments that were promised, so over 100 billion. Some of that crude measure of productivity could be productivity in the sector. And there's some evidence to support that with automation and other factors relating to sourcing changes with EVs. But it is difficult to separate that out.

So my next question was, have the sources of US imports changed? And that was yes. Remember? Imports for consumption is the relevant metric. So this is all imports. That doesn't include trans shipments, so something that comes through the US and goes on to someplace else.

Nominally, there's a stark difference between the trajectory of Canada's auto imports on the left and Mexico's on the right. And you could argue that they're both following established trends, with Canada relatively flat and Mexico on a strong growth path. And that really took off in the gray bar after USMCA. There's the contraction, and then a very, very strong recovery.

When you look at all of the world, imports for consumption, and this time in real terms, and I also adjusted for per vehicle sold in the case of vehicles imported or vehicles produced in the case of bodies, trailers, parts, and components. There are some interesting patterns here. There's, of course, a sharp rise in the dollar value of vehicle imports divided by vehicle sales. And that could be compositional. It could be that we're just making more expensive and luxury EV models. And remember, this is dollars. It's not units. We'll look at units for vehicles next.

And then there's this. There's a big China wedge in the bodies and trailers, tiny little 1 in the vehicles. And I could name them off the top of my head. And in parts, you can see that that China wedge had been getting larger, but it has shrunk a little bit in the post-2020 phase.

There's been an overall decline in the real dollar value of imported parts per vehicle produced. But with continued growth in the dark blue at the bottom, the North American sourcing, and rest of world sourcing has also grown, the red at the top. Slight contraction in China, Asia, other, and Europe-sourced parts values.

When we look at unit volumes, on the left is 2023, on the right, 2024. US light vehicle sales overall grew 2.5% in 2024 over 2023. But the USMCA sourced volume share fell from 78.5% to 77.1% with significant share growth from South Korea. That went from 6.9% to 8.5% in 2024.

And I also want to point out the US firms-- that's the darker blue on the outer ring-- the US produced share of US sold vehicles. So this is GM, Ford, Stellantis, and Tesla and Rivian and the US companies. I'm going to count Stellantis in there because they're the traditional Detroit 3. That darker blue outer circle also fell, from 30.4% in 2023 to 27.5% in 2024.

This is sort of a time series of those 2 pie charts. On the left, I have the US produced share of US light vehicle sales in blue bars. And the USMCA share represented by the red line. And you can see there's a little bit of a fall off in 2023 in the USMCA share, which I talked about, and in the US produced. And when you dig into that, it is almost entirely attributable to the fortunes of 2 companies that have the same 4 letter abbreviations, TSLA and STLA, Tesla and Stellantis. Sometimes I feel a little dyslexic when I write that out in my notes.
 
But in the right chart, I decompose the import share, where you can see a slight rise from Mexico, a little bit of a drop from Canada and Japan. That growth of South Korea coming through since about 2020 really taking off. And all others remain relatively small. And in that little tiny one all over at the top is that Slovakia and China and Hungary. And these were growing, among other sources. I have a whole list of all those vehicles, in case you want to know later.

So next, I turn to the question of when these rules became more restrictive. Did imports follow the rules? Or did they do what some people will do when you set a higher and higher standard-- say, I can't get over that. I can't jump that high. So the prize, if you jump that high, is zero tariff.

Keep in mind there's many, many reasons why an importer might not claim a program that would get them a zero tariff. It could be that the part, component, or vehicle doesn't comply with the rules. It could be that it just costs more than the alternative of paying the tariff. And those tariffs are generally 2.5% for imported passenger cars and parts, and 25% chicken tax for cargo vehicles or pickups and vans.

When I look at the share of vehicles, bodies, and trailers and parts that claimed a program preference, several programs active, but it's primarily USMCA. This is sort of 1 minus the share claim not claiming a program or these are where general rates apply. Canada on the left, Mexico on the right-- there's generally high program compliance, so a large share of vehicles, almost 100% of vehicles, were claiming the zero tariff preference.

In Canada, that continued along fairly high. It dipped a little bit and came back up. In Mexico, it dropped off in 2020 in the gray phase of USMCA and all those other things that happened. And that is quite a considerable drop. We do see drops in the parts as well. Although, a little tick up in Canada in the most recent read of the data.

And bodies and trailers is a mess. Bodies and trailers is something that's a very small share of overall trade value. And I haven't really gotten to unwinding that Gordian knot we've talked about. So I will get to it, but it's not been my top priority to understand what the heck is going on with that line. So fewer, less volume of trade is claiming the preference. So they're paying tariffs.

So have trade values-- trade volumes shifted from the rest of the world to the USMCA? Has there been more regionalization? For this analysis, I look only at the parts and the decomposed parts categories. I'm going to keep bodies, trailers, and cars out of this. And remember, my short answer at the beginning was, yes, there has been some shifting.
Overall, parts imports for consumption-- again, the stuff that sticks here-- grew 10% when you compare the average of the 5 years before USMCA and the 5 years after the in effect date. Again, in 2024, the size of these bubbles represents the volume of trade in 2023. So you could just get a relative share of these are the top 10 import countries.

The big bubble Mexico shows what we've seen in previous charts, large growth, 7%. Not as large as the overall growth for the category of 10%, but a huge volume. That is our number 1 source of imported parts. And then the countries where we see lower volumes of trade post-USMCA are the UK, down 34%. Well, I should have probably had Brexit on my list of things that happened. That also was January 31, 2020. So that might explain that.
 
China, down 15%. The 301 and 232 tariffs hit them very hard. Japan, down 5%. That might be more localization, regionalization here in North America. And Canada, down 3%. Canada did also have 1 of their very-- they only have a handful of plants. So they've had plants down during this period for retooling for new products. So that could explain some of that.

The remaining top countries in the top 10, import sources all grew. The biggest 1, Thailand, up 54%, but still really tiny. Followed by Vietnam, India, South Korea, Taiwan, Germany, and all other countries. I'm going to decompose those parts categories and look a little bit more deeply under the hood here.

Here, I've got to explain what I'm doing here. I'm taking all the USMCA countries together, Canada, and Mexico versus the rest of the world for that same 5 years before and 5 years after time period. I have normalized. I brought it all to 2024 dollars. And we're comparing that average from before and after. More from USMCA would be things to the right on the x-axis. More from the rest of the world would be toward the top of the y-axis.

So you can see there's a lot of growth. Everybody's up in that top right quadrant of more growth from USMCA, more growth from the rest of the world, which makes sense because parts grew 10%. If both USMCA and rest of world grew at the same pace, the dots would line up on that diagonal line. But there's only 1 category on that line, and that's transmissions and powertrain parts. 1 near the line, steering and suspension.

There was greater growth of engine and parts imports for rest of world vis-a-vis USMCA. And this might make some sense, since many of the German producers here in North America are continuing to import engines. As we're on the cusp of electrification, it may not make sense to build an engine plant here in North America and continue to import engines for production plants that are already here.

Seating and interior, that little dot at the bottom, US got fewer imports from the rest of the world than from the USMCA. So that's the only thing in the bottom right quadrant of the chart. I used to do these charts as a full quadrant, all 4 categories, but everything's up in the top right now. So that's how it's turned. So everything else to the right we've seen seeing growth outpacing. So other motor vehicle parts, the big catch all, electrical, electronics, brakes, and metal stampings.

Here, I'm going to break up that last chart into Canada versus rest of world, China versus rest of world, and Mexico versus rest of world. Again, more from the individual countries, the right axis to the right on the x-axis. More from rest of the world is on the top on the y-axis. And on the diagonal line is equal growth between that country and the rest of the world.

Overall, the US is sourcing fewer motor vehicle parts overall. Remember, down 3% from Canada. And the only categories where there were greater imports from Canada than rest of world were electrical, electronics, and other motor vehicle parts. For China, imports were down 15% overall. And you largely see this across a broad range of parts categories-- net lower imports in electrical and electronics and transmission and powertrain parts, and that catch all, other motor vehicle parts.

Import growth in all the other categories, but rest of world growth is above the diagonal. So in every other category, the rest of world growth is outpacing China. That looks like some sourcing shifts from China to rest of world sources.
 
Mexico's chart looks very similar. To the last slide, because they are the biggest kahuna in that big chart. So you see fewer seating and interior parts imports from rest of world, but growth from Mexico and growth in almost all other categories. Mexico parts imports largely are outpacing rest of world when we compare these 2 time periods.

So to wrap up, trade deficits persist. We did see some growth in output and employment, not quite to where it was supposed to be when the agreement was proclaimed. But I don't what their time frame was for that either. We saw imports grow, too, from all sources for vehicles, a smaller share of industry imports claiming the preference for zero tariffs. And the growth of Mexico imports was sharp, but not as fast as the growth overall. And there is quite a bit of evidence indicating there were some sourcing patterns changing.

And with that, I'm going to sit down, and leave this up here because I don't need it, and listen to what Jim has to tell us about diving into 1 of those parts.
 
JIM RUBENSTEIN: All right, thank you.

[APPLAUSE]

Thank you Kristin. And thank you, Rick, for having us here, and to my long-time partner, Tom. Thomas, good luck as you move on ahead. The last time I did a count, I think Thomas and I co-authored 60 published papers or articles, chapters and a book. And so we'll be moving on to the next step here.

So we've been-- we decided to-- we've been working the last few years, like a lot of people, looking at what the changes are related to the electrification and delving deep into that data. What we're looking at here is engines, good old engines and good old ICE cars that we're leaving behind here as we're all concerned and looking at electrification.
We work with the S&P Global Mobility. And we heard from Stephanie Brinley yesterday from S&P. We've been working for many years at the-- I've been a consultant at the Federal Reserve Bank of Chicago now for 20-some years, I guess. And so when I use first person plural, referring to us here-- that had with me in the research division there.
So we take those huge databases that we have from S&P and their predecessors. And you create different worksheets for the different propulsion systems. And increasingly, we focus, of course, on the electrification side and all of that. And then there's that sort of residual, what you pulled out of the system, sitting there in a different worksheet that has those ICE vehicles in there and so on.

And a few months ago, we were looking at that. 1 of us was looking at that ICE worksheet page and said, you know what? There's something interesting going on here that we sort of have forgotten along our fast track onto electrification. And so that's the genesis of this little piece we're doing here, which could be said possibly as a swan song here.
So we have been working with S&P Global Mobility and their predecessors for a couple of decades now, I guess. And so we have plenty of data going back here over quite a period of time. So we said, well, what's happening here since the last time we really pulled out an awful lot out of there in 2016.
 
And so we're working then with production North America, the 3 countries. If you've worked with S&P Global Mobility, you know that you end up with spreadsheets that are hundreds of columns and thousands of rows. And so we're pulling all that into aggregations. And this is what the big picture looks like over the last decade here, which is a decline from 17.5 million vehicles that have engines in them, down to the 14 million in 2023.

And you see a decline there, 12 million to 9 million ICE vehicles with engines. I have to be very careful here. We're talking about vehicles with engines, because, of course, HEVs and PHEVs also have engines in them, right? And that ends up being part of the story. Mexico has increased its number of vehicles assembled in Mexico with engines in them. Again, Canada, we have the decline there.

S&P Global Mobility allow-- again, you can disaggregate things down to as far as you ever want to go with all of this. And so here are, for example, 5 engine characteristics that 1 can disaggregate out of the data there. The number of cylinders, the leaders, whether it's a V-shaped or in line, whether the valves, whether the camshaft is a single overhead or dual overhead, or the other way around, OHVs, where the valve is up instead of the camshaft.

And so I just put at the bottom here what the actual-- 1 example of what is the largest specific volume that we have here, a 4-cylinder, 2-liter, inline engine, 16 valves, DOHC. And that came out to just under 20% of all engines that were sourced here in North America in 2023.

Well, here's where it got interesting for us. And what the heck was going on? Because when we took all this very specific, these 5 characteristics-- again, the displacement size and the camshaft configuration, et cetera, the 5 things on the previous slide there, we have this. Look at the middle 2 graphs there. We have a very dramatic decline in the number of individual engines that are being manufactured in North America here for-- well, let me, again, state it precisely. This is for installation in North America assembled vehicles. So in other words, this is the deliveries to the assembly plants.

This very dramatic decline when you take all 5 of those characteristics. When you look at the 1 that's most familiar to consumers, the 1 on the left here, we have also a rather significant decline in the number of different liter-- different displacement size engines being sourced into North American assembly plants. And then the right-hand graph here is showing you how many different configurations are getting us up to 90%.

Obviously, there's a lot of small volume configurations that are out there and always have been and always will be. So we said, well, what's the vast majority? What's 90% of them? And you see that we've had a sharp decline in the grand total here, the volume that gets us up to the 90% of total sourcing.

So there's a 15% decline in the production of engines in North America over this decade. That is lower, again, than the number of ICE vehicles being assembled in the United States, Canada, and Mexico over the last decade, because, again, of course, what we know is that HEVs in particular, less so PHEVs, are increasing in volume as we're getting more production of the hybrids, the 2 types of hybrids. And those are particularly, again, the HEVs, are taking up a good bit of the slack from the decline in the ICE only propulsion systems that we're seeing.
 
And again, you can see that this is the number of engines being produced in all engine plants in North America over this decade then. We've seen a less-- so the decline there, you see, is from 15 million engines sourcing into North American assembly plants. And again, a little bit of a disclaimer there. That is, we're not measuring any exports to rest of world, to South America, or any crossing the oceans, of which there aren't that many. But we are not dealing with them at all.

You can see the United States, we're down from 10 million to 8 million in the engine plants in the United States. Again, this is the number of engines being produced in the United States for assembly into vehicles in North America. And again, Canada is producing more engines for use in assembly plants in North America today than they were a decade ago.

And the chart, the graph at the bottom there tells a good bit of the story. We are seeing a dramatic decline in the number of engines crossing the oceans. Now, Kristin's numbers from David may not be suggesting the same thing that Standard & Poor's are telling us here. Again, these are the hard numbers disaggregated down to tens of many thousands of rows of vehicle models and so on over this 10-year period.

1 set of data is coming down from the top. And this data is coming up 1 car at a time. So when we count up 1 car at a time, we are seeing a halving of the number of engines going into vehicles assembled in North America that crossed the ocean, that came from anywhere other than elsewhere within North America-- a dramatic decline.

There's virtually no change in the number of plants that are actually assembling. This is the assembly plants. I'm a geographer, and we didn't put maps in this thing. Thomas and I have published a number of papers that will map you to death. And we only put 1 into this presentation today.

So we have virtually no change here in the number of assembly plants that are assembling vehicles with engines. You see Mexico's added 2, and so on. And virtually no change in the number of plants, the engine plants. These are the number of engine plants. So of course, as you know, the economies of scale are different for an engine plant than an assembly plant. And this is a rather stable, long-term, rough relationship. It's a bit less than twice the number of assembly plants to engine plants.

Again, if you do your usual arithmetic on your 2 shifts with minimal overtime in an assembly plant and you get to your quarter million units a year, engine plants have tended to normal, if you will, tend to run maybe getting closer to the half million units a year. So we have that different economies of scale. So you see it here. This is a long-term, stable relationship, so 30-some engine plants supplying 60-some assembly plants.

The mean at the bottom is interesting here. That is engine plants are now supplying, on average, 3 assembly plants. Whereas a decade ago, a typical engine plant was shipping to 4 assembly plants. And you can see at the top row on here that engine plants a decade ago, only 6 of those 36 were supplying 1 and only 1 assembly plant. Now, a dozen engine plants are supplying only 1 assembly plant.

And it's working the other direction as well. If you look at the second line, the top line, there's 2 assembly plants that in 2023 got all their engines from overseas. And when I talked about the sharp decline in the number of engines crossing an ocean, a very, very high percentage of that was taken up just by a couple of assembly plants, rather than across the board, if you will.
 
So if you look at the second row on there, the 1 engine plant, so a decade ago what we had here is that only a quarter of assembly plants got their engines from only 1 engine plant, a quarter-- 15 across the top, a 1 to 1, 1 engine plant to 1 assembly plant. Today, half of the assembly plants are getting their engines from only 1 engine plant.

Here's breaking it out. We didn't do very much of this for this presentation, this short presentation today. But obviously, thanks to our friends at S&P Global Mobility, 1 can disaggregate this out by company. And so this is just showing you quickly that both the Detroit 3 and the internationals are reducing the number of connections here.

In this case, these are the mean number of-- so it's saying that-- say assembly-- say the Detroit 3 are now getting on average-- their assembly plants are now getting on average engines from 2 and 1/2 engine plants. Whereas a decade ago, it was at 3. And the internationals have similarly reduced the number of sourcing locations for their engines. And again, showing the other side of it, these are the engine plants. A decade ago, a Detroit 3 engine plant on average was shipping to 5 different assembly plants, and now it's down to 3 and 1/2.

So the impact of all this, we would assert that there is a simplification going on here. Let me just show you yesterday. No, wait. This is the engines crossing borders. The first set of graphs there would include the overseas 1's. But let's go to the second 1 there. You see that a decade ago, the same country-- that is, is the engine plant in the same country as the assembly plant within North America? That is, is a US assembly plant getting its engines from a US engine plant? Is a Canadian assembly plant getting its engines from a Canadian engine plant? And so forth.

And you can see that there has been a growth across the board there in all 3 countries, USMCA countries. More engines are being sourced inside the country within North America, let alone, never mind the rest of the world. Just within North America, we have a lot fewer engines crossing the borders within North America, let alone the rest of the world.

And look in particular at Canada. Every other chart you ever see here this week, or any time you ever look at data-- poor Canada, right? There's always-- well, Canada is lagging here, and there, and everywhere. But look at the sourcing, their domestic sourcing of engines-- big increase.

So we have fewer engines crossing borders within North America within the 3 countries. We have fewer engines crossing the oceans into North America. And the median distance that, again, we've got this disaggregated data, and we're going through. How far is it from this engine plant to this assembly plant, based on how many units are going there? And so on. And so we come up, ultimately, with a median.

You have to use medians, not means, because a handful of engines coming from the other side of the world screw up the mean numbers there. And you can see median distance has gone down quite sharply. So the average, to use the mathematically less precise word here, the average engine is traveling a lot less today than it did a decade ago.
 
I'm a geographer. We had to at least have 1 map in here. And good old Honda, they got cited a good bit in our discussions yesterday. Look at these 2 maps here. On the 2016 map, each of those lines is a connection between an engine plant and an assembly plant in the Honda system. In principle, Honda has 4 modules, 4 centers, Alliston, the Ontario 1, the Ohio, Indiana cluster, then down the South, and then the Mexico. And so each of these 4 clusters have an assembly plant. Well, in the case of Ohio, Indiana, we've got 3 there. And each of those 4 clusters has an engine plant.

So if you look at 2016 over there, Honda was moving a heck of a lot of engines across the borders there. You've got Alliston assembly plant getting engines from Anna, Ohio. You've got, on the other hand, Alliston engine plant is shipping engines down south from there, and so forth through the system. They're moving back. A decade ago, Honda was moving engines from Mexico north, and they were moving engines into assembly down there southward.

Now look at the 2023. There's nothing left there. 100%, 100.0% of all engines-- I'm sorry. Let's look at the other direction. 100% of all assembly operations in Honda's North America system, according to our friends at S&P Global Mobility, 100% of all of their assembly operations in 2023 got the engines from the engine plant next door.

So we can construct these for all the other companies. Honda just is the easiest 1 to show in just a couple minute presentation here. This map, again, for geographers, for me, it tells it all here. Look at this simplification. They've stopped moving engines. Unless somebody is-- unless 1 of my friends from Canada carried an engine over with you this morning, there are evidently no engines crossing an international border at Honda in 2023. Not 1.

So over the last decade, we've had this 15% decline in the production of engines. That is installation of engines in North American assembly plants to use-- to be more precise here than the shorthand on this summary slide here. And we've had a very substantial, a much more substantial decline in the configurations, the number of leaders, the displacement size, and so forth. There has been a cutback here.

There has been a reconfiguration of engine supply chains. And remember, these are complete, finished engines. We have fewer coming in from overseas. We have fewer crossing the borders within North America. And they're moving a shorter distance.

So if others over these 2 days have said that, in 1 word, this conference, this symposium has been about simplification. We've heard that. I'm sorry. It's been about uncertainty. We're asserting that when it comes to the internal combustion engine side of things, that the 1 word is simplification, that what we are seeing is-- we all know. We've been hearing it from the other side. Oh, the uncertainty. We just don't know over the years ahead. The ICE versus BEV mix, and all of those-- all the uncertainties that are the fundamental theme of this symposium.
 
What we've seen is that over the last decade, the carmakers-- and again, we're not disaggregating-- we can-- the data support whether we're talking about the industry as a whole or the individual corporations-- have dramatically simplified their ICE side of the equation. And that's how we're seeing in this data how they're dealing with this uncertainty, hedging bets by knocking out some of the less demanded displacement sizes, for example, focusing their ICE operations-- and again, we're only showing you engines-- focusing it on smaller, fewer, larger volumes, simplifying what they're doing, hedging their bets against this long-term, what you're calling here uncertainty between ICE and BEV-- simplify the ICE side of things. And there's probably many other types of examples in terms of product of that nature. So that's my 1-word summary. Thanks.

[APPLAUSE]

THOMAS KLIER: Thank you, Jim. Why don't you join us on the podium? With a jump or not.
 
JIM RUBENSTEIN: Yeah.
 
THOMAS KLIER:OK. So we--
 
JIM RUBENSTEIN: Scary.
 
KRISTIN DZICZEK: More bigger than I've got today.
 
THOMAS KLIER: All right, so we've got 16. You see the clock in the back? 16 minutes, just under 16 minutes for questions. So I'm going to have-- I have 1 ready for each 1 of you. And then we'll go to the iPad here. And please keep submitting questions to the panel.

We covered a lot of ground here. And I'm going to start out with the first presentation. You may not remember that David talked about electric batteries. So since you prepared your slides, the policy side has just gone nuts and haywire. It's really interesting to see the timelines involved here. Mining and refining is not something you stand up overnight. But there's also government policy at work. So does your expected timeline stand up to the policy uncertainty or is this going to lengthen further or is it going to shorten?
DAVID COFFIN: Honestly, that's a great question. And on the mining and refining side, I have to say, I don't know a ton about how those things change over time. But I think you're right that that uncertainty probably doesn't boost investment, in that if you're not sure what the demand is going to be, the cycles for any sort of commodity, when the prices are high, you see a lot of investment. And then that boosts production, which then often leads to a glut, which then decreases the investment.

So where that leaves us, the shorter permits might help. But I haven't seen the action yet on that permitting. I don't think the new Department of Interior Secretary is confirmed yet, but I think that will be 1 of his big focuses.
 
KRISTIN DZICZEK: I think the other side of that, too, is China has so much market power in so many of the minerals that even if you have a very robust investment program and supports for domestic mines, refining and processing stages-- there is a mine that came up for cobalt in the US, and then the price tanks. So they can, with their dominance in those minerals, take the price down and make it uneconomic to produce.
 
THOMAS KLIER:Now, in your-- so just a quick follow-up for you, David. In your charts, I think you're very clear about what's currently under construction and what's expected to be put in. I would think the uncertainty hits the furthest to the right bars, potentially, the hardest, because they haven't broken ground yet.

DAVID COFFIN: Yeah. I would imagine so. If it's announced and you haven't started construction, then you have more flexibility, both in terms of canceling, but also just in terms of maybe changing your footprint. Maybe originally you were planning on 3 lines, and you switch to 2, or you have some other configuration.

THOMAS KLIER:Right, right. Thank you. Kristin.

KRISTIN DZICZEK: What?

[LAUGHTER]

We're colleagues and friends.
 
THOMAS KLIER:Yeah, it's all good. It's coming. So first of all, I appreciate you digging into this data here. And as you made clear in, whatever, sort of 2 or 3 slides in, it's OK. And it's important to dig and try to figure out what the world has-- what has changed in the world of trade since a new trade agreement came in, in this case, USMCA.

And of course, there's a whole bunch of reports that have been written on that. But, heck, is it a complicated task, because, number 1, we're trading a whole bunch of objects. No matter how clearly we can measure this. But also, the world does not stand still on us.
 
KRISTIN DZICZEK: Well, yeah. It's a whole bunch of objects. And I'm doing this with North American and standard industrial codes. You could do it in the HS codes, which get you much more detail. It's his job to do this. He's got that report coming out in July about what it really means. And then you've got huge inflation at this time period, which I didn't get into, because I brought everything to 2024 dollars as much as I could. There's just so much chaos going on in this that it's hard to tease it out.
 
THOMAS KLIER: So the 1 thing that was kind of clear, as clear as it could be in the charts, is that the share of traded parts and vehicles that claim the free trade preference, which is another way of saying that qualified as within North America get a freebie. That has declined. But even there, it's hard to come up with a single explanation of why you would do that.
 
KRISTIN DZICZEK: Right. I think it's pretty clear when you go back to the S&P data, which I didn't get approval to show, that the drop in vehicles comes from the Germans, that their engines are largely coming from over the ocean. Like I said, they didn't have enough-- the time frame and the horizon of build an engine plant that's going to be here for 40 years in the middle of a move to electrification makes no sense.

And the rules in USMCA were you couldn't just ship the head and the block separately and bolt them together. It has to be full production here. So they don't have full production here. So they don't meet that. That's 1 of the clear 1's.

The parts, I haven't done any of the side I want to do, which is go out and talk to folks, and say, is it compliance is more difficult to meet? Or is it it's expedient to pay the tariff?
 
THOMAS KLIER: Right. And so from that, it's really hard to draw a line, a clear line to were the objectives of the agreement reached or not.
 
KRISTIN DZICZEK: Right.
 
THOMAS KLIER: Right.
 
KRISTIN DZICZEK: Well, I know-- I mean, those of us who have children, if you set the standard too high, they just say, pfft, I can't do that. I'm just not going to do it at all. So I mean, there could be that it's called the requirements are non- binding. So if they go to such a high level, it's non-binding.
 
THOMAS KLIER:And there's a trade-off, right? At the end of the day, you're minimizing costs.
 
KRISTIN DZICZEK: Yes.
 
THOMAS KLIER: And I mean, these are profit-maximizing entities.

KRISTIN DZICZEK: And there were some media reports, too. I mean, 1 of the requirements on that complicated thing of USMCA rules is a labor value content at a certain wage. And it was thought that, well, Mexican producers aren't going to raise their wage to this higher level. So this is going to drive things to Canada and Mexico. There are a few examples of producers in Mexico that said, it's cheaper for us to stay here and pay that wage.

And that's something that some stakeholders in this process really would like, to have Mexico be a higher wage country, and more on par with the other countries. But every major automotive producing region has a Mexico. It's Poland and Slovakia, and Thailand and India. And we use those, too. But there's a low cost region everywhere. And if you raise the cost in our low cost region, then you see on those other charts more Thailand and India and Taiwan and every place else. So you squeeze the balloon here, and it goes someplace else.
 
THOMAS KLIER: Yep. And it goes back to something I said at the beginning. And that is it is important to keep in mind how this industry touches sort of 2 different geographies being global. So there's the whole trade around the world, if you will. But what is very important in automotive is regional trade, too. I mean, that's why the free trade agreement with Canada came in. That's why there was a NAFTA. And that's why the USMCA.

You can't find an industry in North America that's as integrated as Ottawa's. And hence, that's why we're looking at the data. So speaking of which, Jim, how surprised were you when you found the reduction? The response on the ICE world to shrinking volumes, clearly, is simplification. Were you surprised by the extent that jumped out from the data?
 
JIM RUBENSTEIN: Well, you and I have been working together for at least 20 years very heavily and extensively. And this was 1 of these things, as I said, was sitting in 1 of those other worksheets when you disaggregate data in a massive spreadsheet, and you stick something in there. You don't want to lose it, but you're not really working with it. And lo and behold, when we were looking in there a few months ago, we said, hey, you know what? There's something there.
 
And then we started doing some back of the env-- using 1 of these old-fashioned things here. And we started-- sort of we made up a rough map of North America like this. And I started drawing circles and arrows. And it looked like we had something there. So yeah, I think we were surprised, particularly, again, when we hear that you had that engines and engine parts is up for the rest of world compared to North America.

And so we're only talking about finished engines, right? The complete engines. We're not measuring pistons, valves, cylinder shafts, and so forth. So presumably, what we've got here is your data showing that the bits and pieces are still traveling around the world, but the final engine itself, which, again, is a much larger, heavier, bulk, and more fragile than the individual parts.

And so we're seeing a dual effect here. We're seeing that the carmakers are moving engines a lot less mileage. And they've cut down on the variety of engines that they're offering to consumers. That's how they're hedging their bets in this uncertain age.
 
KRISTIN DZICZEK: Do you think it could also be a cost reduction, if it is you're simplifying your supply chain for engines, but you're reducing the cost by having more imported pistons and rings and all of that? I mean, because cost is everything right now, it seems.
 
THOMAS KLIER: Yeah, for sure. And that's the piece that's under the control of the OEM directly. So I'm going to go to the remaining 5 minutes to the questions from the audience.

But I did want to make 1 point. So the common thread through all 3 presentations, every 1 of you worked with data. And I think that's the important contribution of this session here. We heard about the legal framework. We heard about uncertainty from the forecasting and from the consumer touchpoints situation. It takes all these things to put together.
So let's see if we can go quickly. Everybody gets 1 from the audience. David, is there a way that you can think of how a trade agreement would be able to provide incentives to get into the critical minerals space in a positive way to incentivize North American, maybe, mining and refining?

DAVID COFFIN: My first thought is going towards the Inflation Reduction Act, starting to have requirements in there. I am less familiar with the trade rules in USMCA for the critical minerals, but you could start using similar things to what you see in the parts space with, at the processed mineral level, having some sort of a value content requirement type of thing. But I imagine at the mineral space, it's usually just a process rule that as something becomes processed, it gains origination.

THOMAS KLIER:I mean, there's the-- what is it? Countries of concern. What's the--
 
KRISTIN DZICZEK: Foreign entities--
 
THOMAS KLIER: Foreign entities of concern, right? And then that gets pretty complicated, too. And that's already-- I mean, that's in the policy space, I suppose.
 
KRISTIN DZICZEK: That's in the IRA, though, which if IRA goes away, that goes away.
 
THOMAS KLIER: But if you were to rewrite a trade agreement, you could bring. So if you look-- the question is about what rules could you use to bring this in.
DAVID COFFIN: Yeah, FEOC would definitely have a big impact on minerals without starting to have a value content requirement or anything like that.
 
KRISTIN DZICZEK: And some continuity, too. I mean, if that were to be in trade agreements, that's continuity to where the companies were already going.
 
THOMAS KLIER: Yes.

KRISTIN DZICZEK: And I think when you go to Schwietert's conversation or comments yesterday about how many vehicles actually qualify for the $7,500, a lot of them are falling off.
 
THOMAS KLIER: Very few.

KRISTIN DZICZEK: On the FEOC.
 
THOMAS KLIER: Very few. Yes, indeed. So Kristin, to you, going back to the share of parts and vehicles that don't utilize--

KRISTIN DZICZEK: The preference.
 
THOMAS KLIER: --the preference, is there data on the revenue collection then? Because they pay the-- is it 5% or 2.5%?

KRISTIN DZICZEK: Yeah.
 
THOMAS KLIER: Is there something you could measure on the flip side?

KRISTIN DZICZEK: David. I don't know if I can give it to-- if I can get it in the public, or if we can get it to--
 
THOMAS KLIER: Somebody has it.

DAVID COFFIN: Yeah. So Kristin pulled a lot of the data from--
 
KRISTIN DZICZEK: DataWeb.
 
DAVID COFFIN: My organization's DataWeb, which is a free resource anyone can access. And calculated duties would be the 1 that you would pull. And that should show the amount of tariff that's being paid in terms of dollars.
 
KRISTIN DZICZEK: Next step.
 
THOMAS KLIER: Next step.

KRISTIN DZICZEK: I haven't been doing anything else the last couple of weeks. So it's OK.
 
[LAUGHTER]
 
JIM RUBENSTEIN: Right.
 
THOMAS KLIER: We all understand that. That's right.
 
JIM RUBENSTEIN: Giving us this awesome symposium.

THOMAS KLIER: That's right.

JIM RUBENSTEIN: Thank you.
 
THOMAS KLIER:Yes. So everybody can listen and learn something, right? I mean, this is a strange time for everybody.
Economists like to talk about external shocks. Well, if you ever looked for 1, there it is. And to make it worse, we--

KRISTIN DZICZEK: Many shocks, not just 1.
 
THOMAS KLIER: Well, and the uncertainty, like Stephanie said yesterday, has gone through the roof, because delay is just more uncertainty. So on that uplifting note, we're almost out of time. And I'm just going to-- I'm going to call it. I know there's a concurrent event going on that starts at 11:30. We want to make sure everybody in the room who needs to go there has the opportunity to do that.

So thank you, Kristin. Thank you, Jim. And thank you, David. I hope this was informative. And regardless, this was the 1 panel of the event that was sandwiched between 2 meals. So it's time to eat again.
 
JIM RUBENSTEIN: And thank you for your 32 years of service to the Federal Reserve Bank of Chicago.
 
KRISTIN DZICZEK: I have to agree, wholeheartedly. Great way to end.

[APPLAUSE]
 
THOMAS KLIER:I wouldn't want to end it any other way.
 
KRISTIN DZICZEK: Hmm?
 
THOMAS KLIER:I wouldn't want to end it any other way.
 
KRISTIN DZICZEK: Great.
 
THOMAS KLIER: All right.