AIIS July Market Update: USMCA Takes Effect

SEATTLE (Scrap Monster): The U.S-Mexico-Canada Agreement (USMCA) went into effect on July 1, replacing NAFTA.

President Trump, who had derided NAFTA as “perhaps the worst trade deal ever made,” lauded the new pact.

“The USMCA is the largest, fairest and most balanced trade agreement ever negotiated and contains innovative provisions to help grow the economy and support American jobs,” Trump said.

The USMCA addresses topics and technologies that have emerged since the North American Free Trade Agreement (NAFTA) was implemented in 1994, such as the Internet and certain intellectual property issues. In addition to these updates, it also implements new labor and environmental mandates and establishes additional conditions in order for products to be free from tariffs. In the case of vehicles, for example:

• 70 percent of the steel and aluminum must be from North America (NAFTA contained no such provision) 

• 75 percent of the overall content must be produced in North America (NAFTA set the threshold at 62.5 percent) 

• 40 percent of car components and 45 percent of light truck components must come from factories that pay workers at least $16 per hour

The agreement includes a sunset clause after 16 years, but it can be extended when the three countries review it every six years.

Courtesy: AIIS