After more than a year of negotiations, representatives from the United States, Mexico and Canada announced last night that they had reached a new trade agreement to update the North American Free Trade Agreement (NAFTA). The new trade agreement will be called the United States-Mexico-Canada Agreement (USMCA). The agreement will need to be signed by leaders from all three countries and ratified by respective legislatures, and it is expected to begin taking effect in 2020 with other provisions rolling out in the following years.
The automotive sector became one of the driving issues of the new agreement, and new rules were established to keep auto manufacturing in North America. When the new rules roll out in 2020, a car or truck must have 75 percent of its parts and components made in North America in order to qualify for zero tariffs. That's up from the current 62.5 percent. Additionally, 30 percent of the car's production must be done by workers making $16 per hour. In 2023, that percentage will go up to 40 percent.
Canada will also be opening its dairy market to more U.S. imports. The industry, which had a number of tariffs in place to safeguard Canadian dairy farmers, will now be more open to U.S. dairy farmers.
The three countries also updated the intellectual properties chapter of the agreement to include more protections for patents and trademarks. The new agreement will have increased protections for industries such as biotech and financial services.
One provision not covered in this new agreement is the U.S.'s tariffs on Canadian steel and aluminum. For now, the tariffs remain, and the two countries are expected to continue negotiations unrelated to USMCA.
More information about USMCA is expected to come out this week. Check back with Furniture, Lighting & Decor this week for more analysis of what this agreement will mean for the home furnishings and lighting industries.
