3 Winners and 3 Losers From Today’s North America Trade Deal Announcement

“the USMCA is an agreement that will increase barriers to trade across North American borders and will impose more managed trade. All trade deals are a form of managed trade, of course, but relative to the standards set by NAFTA, the USMCA seems like a step backward.

The main way the USMCA reduces free trade is in the so-called “rules of origin” that will apply to cars built in North America. In order to cross borders tariff-free, 75 percent of the value of materials within a car or truck will have to be produced in North America. Additionally, 40 percent of the steel used in auto production will have to come from U.S. steel plants. The deal also gives the U.S. government the ability to impose quotas on imported cars from Canada and Mexico. That combination of protectionism and increased federal power over the decisions of private businesses is a major black mark against the deal.”

“The intended consequence of several components of the USMCA is to encourage businesses to shift production from Mexico into the United States.”

“the unintended consequence of those new rules might be a reduction in manufacturing across all of North America. When it comes to cars, for example, companies might find it cheaper to simply pay the 2.5 percent import tax rather than comply with the new standards to be able to trade duty-free.”

Leave a Reply

Your email address will not be published. Required fields are marked *