Doing the USMCA
The Trade Guys unpack the deal to replace NAFTA: the U.S.-Mexico-Canada Agreement. What’s in it, what does it say about the Trump administration’s trade policy, and what’s next for the new deal.
What We’re Reading
“Trump says USMCA trade deal with Mexico and Canada proves tough talk and tariffs work”
“President Trump said Monday that his successful use of economic threats and other hardball tactics to pressure Canada and Mexico into major trade concessions would serve as a model for future negotiations, putting other world leaders on notice.”
“In a news conference, Trump said he would try a similar approach with the European Union, China, Japan and potentially Brazil and India, convinced that foreign leaders take the United States seriously only if the White House threatens to upend economic ties.”
Why it matters: President Trump is touting the conclusion of USMCA as evidence that his negotiating style – heavy on threats and tariffs – works.
Key question: Does the NAFTA exercise prove that President Trump’s hardball approach to trade negotiations works?
“Trump’s NAFTA revision pries open Canada’s dairy market”
“Dairy farms in Trump country won back a multimillion-dollar trade niche with Canada under a revised agreement with the United States’ northern neighbor.”
“Wisconsin and upstate New York will be able to resume exporting milk products used mostly in cheese and yogurt production under terms of the revised trade agreement announced Monday.”
Why it matters: President Trump was able to resolve a key ask from the dairy industry and many members of Congress in USMCA: to gain additional access to Canada’s heavily protected dairy market. Support from the industry and members of Congress from dairy-heavy states could be instrumental in building momentum for approval of USMCA in the U.S.
Key questions: What were the outcomes on dairy in USMCA? Did the Trump administration get a better deal than the Obama administration managed to get in TPP? How important will support from the dairy industry and lawmakers from big dairy states be in approving the deal? How will Canadians react to providing the U.S. additional access to its dairy market?
“USMCA trade deal gives automakers breathing room but could boost car prices for US buyers” Detroit Free Press
“As the Trump administration touts a last-minute deal with Canada to remake the North American Free Trade Agreement, the agreement’s importance may be more about simple certainty than wholesale change for the automotive industry and the jobs it produces.”
“Experts caution that it’s unclear whether the deal will lead to more jobs, and some warned that consumers could take a hit from higher vehicle prices. Ending the threat of more tariffs on key trading partners such as Canada and Mexico will allow the industry to breathe easier, but trade disputes with countries such as China mean uncertainty remains.”
“Requirements for more regional content produced by workers making higher wages should mean a boost for American workers, but other aspects of the deal between the United States, Canada and Mexico muddy the waters.”
Why it matters: The new automotive rules of origin in USMCA are perhaps the most consequential aspects of the new agreement. They have the potential to bring some auto jobs back into the U.S. but could also constrain supply chains, increase manufacturing costs, and spike car prices for consumers.
Key questions: What is the new automotive rule of origin in USMCA? How is it different than the auto rules in NAFTA? What impact will the new rules have on the auto industry?
“Trump Clears Deck for China Trade War With New Nafta Deal”
“President Donald Trump looks to be preparing for a potentially protracted economic war with China by clearing the decks of disputes with America’s other trading competitors.”
“In just the last few weeks, he’s struck a last-minute deal with Canada and Mexico, signed a trade agreement with South Korea and convinced Japan to begin bilateral economic negotiations. The North American accord also includes provisions seemingly aimed at keeping Chinese products out of the region.”
“’Several months ago the U.S. had a multi-pronged attack on its trading partners,’ said Dec Mullarkey, managing director for Sun Life Investment Management which oversees $47 billion in assets. ‘Now the U.S. can zero in on China.’”
Why it matters: The Trump administration is steadily cleaning up its trade skirmishes with countries traditionally considered to be U.S. allies. Meanwhile, its offensive against China shows no signs of slowing.
Key questions: Will trade truces with Mexico, Canada, the EU, and Japan allow the administration to focus more on its deepening trade confrontation with China? Are we seeing a shift towards coalition building to confront China? Is more focus from the administration on China a good thing for the global economy or U.S. economy?