North America: NAFTA becomes USMCA

5 min
Alexis Garatti
Alexis Garatti Head of Macroeconomic Research

On September 30, Canada, Mexico and the US reached a last minute agreement on a vast revision of the NAFTA that President Trump had previously judged “the worst trade deal ever”. After one year of negotiations, the three trade partners eventually adopted the following changes:

  • a higher share (from 62.5% to 75%) of North-American content to be imposed to auto manufacturers as a condition to benefit from duty free access to markets
  • auto manufacturers will also have to make sure that two fifths of this content has been produced by workers being paid at least USD16 per hour
  • the US secured better access to Canada’s dairy market
  • dispute resolution mechanisms have been broadly maintained.

In our view, this agreement won’t really achieve its aims of helping the US reduce its trade deficit, but will insure Canada and Mexico against potential tariff attacks from the US, better protect manufacturing workers, increase costs for companies and set an example for future global trade agreements.