House Passes USMCA Trade Deal, Replacing NAFTA
The House of Representatives approved a new North American trade deal on Thursday, causing many to breathe a sigh of relief. The House vote sends the measure to the Senate, with the probable outcome of it being pushed through.
When is another matter, however, as Senate Republican leader Mitch McConnell said the measure would likely be taken up after an impeachment trial. That means we’ll be waiting until 2020. Still, the U.S. Mexico Canada Agreement (USMCA) is one step closer to replacing the North American Free Trade Agreement (NAFTA). Barring a governmental curveball, the automotive industry now knows what to expect.
The House approved legislation to implement USMCA by a 385 to 41 vote — with 193 Democrats and 192 Republicans supporting the pact. Changes from NAFTA are vast, with USMCA updating provisions for the internet, e-commerce, digital services, and other industries that didn’t exist in the 1990s.
For automakers, new rules stipulate that 75 percent of auto content be made in North America — up from NAFTA’s 62.5 percent. Additionally, 40-45 percent of all vehicle content is required to come from employees earning at least $16 an hour to qualify for tariff-free treatment. Provisions were also made to support the rights of Mexican line workers. Otherwise, the $1.2 trillion annual trade route is going largely unaltered.
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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Matt, what will this mean for Chinese made vehicles like GM's SUVs and Volvo S90? Are they getting hit with a perma-tariff? And what about the Chinese produced parts that are used to make cars in North America - will production of these parts get repatriated to Cancun or Dearborn or the Great White North? If the US government was genuinely committed to US or North American produced vehicles, they would mandate that car buyers see on the window sticker the cost of the tariff as a line item.
All (new car) auto dealers are corrupt until proven otherwise, even Toyota dealers. It's the nature of the beast. Show me anyone paid on commission that isn't trying to maximize their pay and or a dealer that hates it and the added revenue.
It all comes back to my ill fated Kia Optima purchase. - Be honest with who you are as a car guy. When I totalled my G at the track I thought I could leave fun cars behind. Bad idea. - Test drive multiple cars, even if you have your mind made up on one. ESPECIALLY if you have your mind made up on one. - Analyze your needs and operational freedoms. If I could do it all over I would have got something like a Corvette to daily drive and a big cheap sedan for the 10 minutes a day I need a back seat. Oh well. TLX is good to go. You live and you learn
Should in theory help the auto sector in Canada, but too late for Oshawa. As @Slavuta posted, it makes manufacturing in Mexico more expensive. But is it that much more that more manufacturing will return to the USA and/or Canada?