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DEAL IN PLACE TO UPDATE NAFTA, APPROVAL STILL NEEDED

October 12, 2018

DEAL IN PLACE TO UPDATE NAFTA, APPROVAL STILL NEEDED

Trump has not been happy with NAFTA since taking office, at times calling it the "worst trade deal ever signed by any country". After working for more than a year to finalize a deal, Trump called the new agreement "truly historic". The US, Canada and Mexico have reached a deal to update and rename NAFTA. The United States-Mexico-Canada Agreement (USMCA), a 16-year trade agreement, would not go into effect right away as key provisions wouldn't start until 2020 because the approval process will take quite some time. 

Among some of the key components of the proposed agreement: 

  • Beginning in 2020, a car or truck must have 75 percent of its components manufactured in one of the three countries to qualify for zero tariffs. A roughly 13 percent increase from the NAFTA requirement of 62.5 percent.
  • Additionally, starting in 2020 at least 30 percent of the work on a vehicle must be completed by a worker making $16/hour, jumping to 40 percent in 2023.
  • United States dairy farmers are granted a larger market share in the Canadian milk market
  • "Side letters" were signed allowing Canada and Mexico to largely dodge Trump's auto tariffs
  • Tariffs on Canadian steel stay intact for now
  • Significant upgrades to environmental and labor regulations 
  • More protections for intellectual property
  • The deal must be reviewed after six years, if all parties still agree, the deal will continue for the full 16 years 

It is important to remember that although the framework for a new trade deal is in place, the USMCA must still be ratified.

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