District of Columbia — Under President Donald Trump, trade has come to the forefront of American politics, with his tariffs on just about every major country we trade with garnering praise, criticism, and uncertainty among Americans. While his trade war rages on with China, President Trump has come to agreements on trade with the European Union, Mexico, Canada, and recently Japan. The largest achievement among these agreements has been the U.S.-Mexico-Canada Agreement (USMCA), which will replace the North American Free Trade Agreement negotiated by President Bill Clinton. Here are more details regarding the USMCA, what it replaces, and what still needs to happen for it to be official.
Key USMCA Details
Automotive: 75% of all car parts will be manufactured in the United States, 40-45% of the car must be assembled by workers making at least $16 per hour, Mexico and Canada are exempt from car tariffs
Dairy Products: Canada will open up their dairy markets a little more to the United States, increasing tariff free access from 3.25% to 3.6%. They also increased the duty free access for Canadian citizens from $20 to $150.
E-Commerce: The agreement bans duties on software, video games, e-books, music, and films, which is something not addressed in NAFTA due to the newness of it
Poultry/Eggs: American exports of poultry and eggs will gradually increase, with poultry increasing by one percent every year for ten years after the sixth year of the agreement. For eggs, 10 million dozens will be exported in the first year, with a one percent increase for ten years afterwards.
Sunset Clause: Unlike NAFTA, which was in effect indefinitely, the USMCA will expire after 16 years, with Mexico, Canada, and the U.S. being required to review it every six years with the option to extend it beyond 16 years.
So What’s Next?
Mexico is the only country where the USMCA has been officially ratified, as Ottawa and Washington currently face their own political hurdles to ratification. Currently, the USMCA is being debated in a committee within the Canadian legislature, while Congress has yet to take up the USMCA in Washington. All three nations require the ratification by their legislatures, so NAFTA remains in effect for the time being until the USMCA can replace it.