President Trump has been highly critical of the North American Free Trade Agreement (NAFTA) and has complained it effectively sends jobs to Canada and Mexico. His administration has been working on renegotiating the agreement for about a year and it appears big changes are coming.
In a press release, The White House announced it has secured a preliminary agreement with Mexico that “modernizes and rebalances the trade relationship to reflect the realities of the 21st century.” The administration didn’t go into specifics, but said the proposed United States–Mexico Trade Agreement is a “mutually beneficial win for North American farmers, ranchers, workers and businesses.” The government went on to say the proposed agreement will create “more reciprocal trade that grows the economy, supports high-paying jobs for American workers and protects American intellectual property.”
One of the biggest changes in the agreement focuses on so-called “rules of origin” that concern automobiles. The government says the changes will “incentivize billions a year in vehicle and automobile parts production in the United States, supporting high-wage jobs.” While nothing is official, it appears the proposed agreement will require vehicles built in Mexico to use more North American-sourced components to achieve duty-free status.
A big deal looking good with Mexico!
— Donald J. Trump (@realDonaldTrump) August 27, 2018
In a statement, Trump said “America has … finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs and our Nation’s wealth.” His sentiments were echoed by Vice President Mike Pence who said “The U.S.–Mexico Trade Agreement is a win for American ranchers, manufacturers and auto workers.”
South of the boarder, the reaction was more subdued as the office of Mexican President Enrique Peña Nieto released a statement saying the two nations have “reached an understanding on the main issues of importance for both countries.” The Mexican government went on to express their desire for Canada to rejoin the negotiation process with the hopes of “concluding a trilateral negotiation this week.”
Canada’s absence in the latest round of negotiations was notable and The Detroit News reports discussions with America’s neighbor to the north will start soon. Unfortunately, they’re already off to a rocky start as Trump threatened Canada with more tariffs.
In a press conference, Trump said “I think with Canada, frankly, the easiest thing we can do is to tariff their cars coming in.” He went on to say “It’s a tremendous amount of money and it’s a very simple negotiation.”
If Trump were to follow through on his threat, a number of automakers would be significantly harmed. Fiat Chrysler Automobiles, in particular, would have tariffs on the entire Chrysler lineup, while Dodge would get hit on the Charger and Challenger which are made in Ontario.