President Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto signed the new U.S. Mexico Canada Agreement — or USMCA — in Buenos Aires on Nov. 30.
The agreement provides increased requirements for automotive components to be produced in North America and follows more than a year of talks to update the 24-year-old North American Free Trade Agreement (NAFTA), which supports about $1.2 trillion in annual trade among the three countries in the USMCA.
The USMCA differs from NAFTA in several ways. One of the most notable changes, and of particular interest to metalcasters, has to do with the way cars and truck are manufactured.
Starting in 2020, to qualify for zero tariffs, a car or truck must have 75 percent of its components manufactured in Canada, Mexico or the United States. This is a substantial boost from the current 62.5 percent requirement. The rules also require that a portion of cars be made in factories paying at least $16 an hour — a provision that could shift some auto manufacturing from Mexico to the United States.
The USMCA also contains new provisions governing digital trade and intellectual property. It does not affect tariffs on imported steel and aluminum that the U.S. imposed this year, nor the retaliatory tariffs that Canada and Mexico imposed in response.
What’s next? The new deal won’t go into effect right away. Each country’s legislature also must approve the agreement. Already, key members of Congress from both parties have expressed significant concerns with USMCA and are demanding changes.
AFS will continue to be engaged with USTR and Congress on this agreement, as well as the Section 232 tariffs. For a link to the signed USMCA agreement and other related materials, visit https://www.afsinc.org/trade.