Signing the USMCA: Will They, or Won’t They?

Tomorrow is a big day for the United States, Canada, Mexico, and thousands of business owners who rely on NAFTA to remain profitable. We are just hours away from when the representatives from the 3 North American countries are scheduled to sign the United States – Mexico – Canada Agreement (USMCA) held in Buenos Aires, Argentina during the G20 summit.

However, there are still issues that need to be resolved before they sign.

The U.S. Has Not Lifted Tariffs

On June 1st of this year, President Trump imposed high tariffs on aluminum and steel imported from Canada, Mexico, and the European Union. Consequently, this produced an international political firestorm. The tariffs have brought in over $1 billion, and President Trump Tweeted that the tariffs would help the American economy by paying down the massive $21 trillion debt and reducing taxes:

..Because of Tariffs we will be able to start paying down large amounts of the $21 Trillion in debt that has been accumulated, much by the Obama Administration, while at the same time reducing taxes for our people. At minimum, we will make much better Trade Deals for our country!

— Donald J. Trump (@realDonaldTrump) August 5, 2018

The new tariffs forced the leaders of Canada, Mexico, and the U.S. to renegotiate NAFTA, signed in 1993. The talks led to the USMCA, what some are calling the “new NAFTA”, a modernized agreement with new chapters and provisions that are controversial.

The leaders of Canada & Mexico both hoped that the tariffs would be lifted before the USMCA signing – but with just hours until the scheduled signing, the tariffs remain in place, causing even more tension between the countries.

*NAFTA stands for North American Free Trade Agreement; signed into law on December 8, 1993 and came into effect on January 1, 1994.

The Agreement’s Wording Issues

Earlier this month, the U.S. attempted to change some of the text of the USMCA pact without partnering with Canada and Mexico first. This was not well received by the Prime Minister of Canada, Justin Trudeau.

A Canadian source stated that the new wording “is not at all what we agreed to.”

This disagreement is still playing out with Trudeau stating just yesterday that Canada is “still in discussions with the Americans” about the issue, even just hours before the signing.

Impact on American Business

The jury is still out on exactly how the USMCA will affect American businesses, who are still searching for some certainty in the agreement. The increases on the de minimis threshold are sure to benefit e-commerce for American retailers selling to Canada.

But other USMCA chapters increase concern for other industries like the American auto industry, who will see increased expenses, because Mexican manufacturing of auto parts will cost more per the agreement.

Most American companies aspiring to take their business international look to Canada & Mexico first because of the benefits provided by the Free Trade Agreement.

If the USMCA is signed by the United States, Canada, and Mexico tomorrow at the G20 summit, we will see in the coming months how this will affect the nation’s international business between the countries.