WASHINGTON, D.C — President Donald Trump last Wednesday signed into law a major rewrite of the rules of trade with Canada and Mexico that will soon replace the Clinton-era North American Free Trade Agreement (NAFTA).
Trump made renegotiating NAFTA a priority during his 2016 campaign, although trade experts say the impact of the new U.S.-Mexico-Canada Agreement will be modest.
“This is a cutting-edge, state-of-the-art agreement that protects, defends, and serves the great people of our country,” says President Trump said in an outdoor signing ceremony at the White House. “Together we are building a glorious future that is raised, grown, built and made right here in the glorious U.S.A.”
Canada and Mexico already represent the top two export markets for U.S. goods. But the new pact, along with the signing of a “phase one” agreement with China, dials down trade tensions that contributed to slowing economic growth globally.
The leaders of the U.S., Canada and Mexico signed the deal in late 2018. Legislation implementing it received overwhelming, bipartisan support in Congress after several months of behind-the-scenes negotiations between Democratic lawmakers and the Trump administration.
NAFTA, which took effect in 1994 under President Bill Clinton, tore down trade barriers between the three North American countries and commerce between them surged. But Trump and other critics said NAFTA encouraged factories to leave the United States and relocate south of the border to take advantage of low-wage Mexican labor.
Trump threatened to leave NAFTA if he couldn't get a better deal, creating uncertainty over regional trade.
His trade negotiator, Robert Lighthizer, pressed for a revamped pact designed to bring factory jobs back to the United States. The new agreement, for example, requires automakers to get 75 percent of their production content (up from 62.5 percent in NAFTA) from within North America to qualify for the pact's duty-free benefits. That means more auto content would have to come from North America, not imported more cheaply from China and elsewhere.
At least 40 percent of vehicles would also have to originate in places where workers earn at least $16 an hour. That would benefit the United States and Canada but not Mexico, where auto assembly workers are paid a fraction of that amount.
The independent U.S. International Trade Commission last year calculated that the U.S.-Mexico-Canada deal would add 0.35 percent, or $68 billion, to economic growth and generate 176,000 jobs over six years, not much of a change for a $22 trillion economy with 152 million nonfarm jobs.