“USMCA” might not roll off the tongue like “NAFTA.”
Nonetheless, it’s the talk of North America.
The United States-Mexico-Canada Agreement (USMCA) — the successor to the 1994 trilateral trade deal, the North American Free Trade Agreement (NAFTA) — was signed Friday by President Donald Trump, then-President Enrique Peña Nieto (Nov. 30 was his final day in office) and Prime Minister Justin Trudeau on Friday during the Group of 20 (G20) summit in Buenos Aires, Argentina.
The deal must still must be ratified by the legislatures in each country; under a Democrat-majority House, it remains to be seen if the deal will be held up in any meaningful way.
Regardless, industry leaders and politicians shared their takes on the USMCA signing, a culmination of NAFTA renegotiation efforts that formally began in August 2017.
While some of the USMCA is relatively unchanged from NAFTA, it did offer changes to sections related to the automotive market, including an increase to 75% — up from 62.5% — for automotive regional content rules and more stringent rules on wages for laborers (40-45% auto content must be produced by workers making a minimum of $16/hour).
For many firms and industry groups, the reaction was simple: the deal marked a good step, but tariffs on steel and aluminum vis-a-vis Canada and Mexico should be removed.
“Today’s signing is an important step towards achieving free and fair trade in North America,” said Joe Hinrichs, executive vice president and president of global operations for Ford Motor Co. “We look forward to being a collaborative partner to support the ratification of the agreement in all three markets because it will support an integrated, globally competitive automotive business, helping to drive volume and support manufacturing jobs.
“To achieve the full potential of the trade agreement and to ensure ratification, the elimination of tariffs on steel and aluminum will be critical and we will continue to work with all stakeholders on this important issue.”
Earlier this year, Ford CEO Jim Hackett said the Trump administration’s tariffs on steel and aluminum, which remain in place vis-a-vis Canada and Mexico, would cost the Big Three automaker $1 billion in profits.
Gary Jones, president of labor union United Automobile Workers, panned the “new NAFTA,” referring to the recent moves by General Motors to close seven plants (five in North America) and a 15% workforce reduction.
“Before the ink hit the paper, General Motors has already signaled that the ‘New’ NAFTA (known as USMCA) is not strong enough, as it stands today, to deter them from moving products and taking advantage of low cost labor,” Jones said. “Quite simply, the ‘New’ NAFTA needs more input and more work. We were hopeful that this new agreement would rein in the corporate greed that has bled manufacturing in the United States. Unfortunately, as GM’s idling of plants in Ohio, Michigan and Maryland this week showed – the ‘New’ NAFTA, as it stands now, is not strong enough to protect American workers.”
During the signing ceremony Friday, Trudeau directly addressed Trump to indicate the importance of removing the tariffs.
“As I discussed with President Trump a few days ago, the recent plant closures by General Motors, which affects thousands of Canadian and American workers and their families, are a heavy blow,” Trudeau said. “Make no mistake: We will stand up for our workers and fight for their families and their communities.
“And, Donald, it’s all the more reason why we need to keep working to remove the tariffs on steel and aluminum between our countries.”
Canada and Mexico were initially temporarily exempted from the tariffs, which at first were perceived as a measure expected to target China; however, the countries’ temporary exemptions were allowed to expire as of June 1.
Recreational boating industry groups were among the many to offer general praise for the deal, with the caveat that the tariffs should, in their view, be removed.
Thom Dammrich, president of the National Marine Manufacturers Association (NMMA), and Sara Anghel, president of NMMA Canada, issued a joint statement on the heels of the signing, stating any enthusiasm they had for the deal was outweighed by concerns related to the tariffs (and subsequent retaliation).
“When the Trump Administration hit key allies with tariffs under the guise of a national security threat, Canada and Mexico responded with punitive tariffs on distinctly American made industries and products, including recreational boats,” the statement says. “As a result, U.S. boat exports to both countries – which account for more than half of the U.S. industry’s international sales – have all but dried up, jeopardizing thousands of jobs and businesses in all three countries. For every day that passes without a solution to this problem, the chances of seeing irreparable harm to our industry grows.”
The Coalition of American Metal Manufacturers and Users (CAMMU) also panned the deal, citing the fact that the Section 232 tariffs on Canada and Mexico had not been terminated.
“A golden opportunity was missed today to improve upon the Trump administration’s self-destructive 232 tariff scheme,” CAMMU spokesperson Paul Nathanson said. “Thousands of manufacturing companies around the country must today cope with price hikes, delivery delays and the outright unavailability of the steel and aluminum they count on to make their businesses operate.”
Nathanson continued: “By cutting itself off from the global steel market, the U.S. has become an island of high steel prices. The result of this policy is simple: American steel-using manufacturers cannot successfully compete against foreign competitors able to purchase steel at world market prices outside this country. President Trump must lift the tariffs on steel and aluminum or risk undermining the broader U.S. economy.”
The American Iron and Steel Institute (AISI) also weighed in on the signing.
“We appreciate the administration’s hard work to reach this trade agreement between the U.S., Canada and Mexico,” said Kevin Dempsey, AISI’s senior vice president of public policy. “The NAFTA has provided significant benefits for the American steel industry by promoting the development of manufacturing supply chains in North America, especially with key customer groups like the automotive industry. The new agreement builds on this success by establishing new rules of origin that will further incentivize the use of North American steel in the manufacturing of automobiles and other steel-intensive goods in North America.”
The full text of the USMCA can be found here.