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NAFTA No More: Introducing the US-Mexico-Canada Agreement

Wednesday, October 3, 2018
The United States, Mexico and Canada agreed on September 30 to a revised version of the North American Free Trade Agreement (NAFTA), called the United States-Mexico-Canada Agreement (USMCA). For most stakeholders, the USCMA represents a welcome continuation of existing tariff-free treatment for trade between the three countries. The agreement contained a key U.S. demand to increase the North American content requirement for automobiles receiving duty-free status, moving from 62.5 to 75 percent and requiring that all “core parts” originate in North American countries. USMCA also contains a provision sought by labor unions requiring that at least 40 percent of automobile contents be made by workers earning an average base wage of $16/hr. or more. The agreement included four side letters on tariffs.

The United States agreed to exempt the current automobile and auto-part production capacity of both countries from any new Section 232 actions. The Commerce Department is still investigating potential harm from automobile imports and the Trump administration has not yet decided to move forward with tariff action. The United States committed to exempt both Mexico and Canada from any new Section 232 actions for 60 days after a measure is imposed in order to “seek to negotiate an appropriate outcome.” However, the current 232 tariffs on steel and aluminum imports remain in place.

PMA’s One Voice team in Washington, D.C., will offer more analysis on the new agreement in the coming days.


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