Trade Agreement Updates

In the new U.S.-Mexico-Canada Agreement (USMCA), which would replace the North American Free Trade Agreement (NAFTA), among gains for the United States is a new provision negotiated with Mexico related to auto products.

Under the new terms, to qualify for tariff-free sales, 75 percent of automobile materials must be produced in the United States and Mexico (an increase from the previous 62.5 percent target). In addition, 40 percent to 45 percent of those materials would be required to be made by workers earning at least $16 an hour.¹ These provisions are aimed at encouraging U.S. manufacturing and regional economic growth and higher wages for U.S. workers.

Other components of the agreement include provisions regarding Chapter 11 investor-state dispute settlement and Chapter 19 dispute resolution; copyright terms; online shopping duties and sales taxes; access to the Canadian dairy market; and data protections for biologic drugs.²

Congress is unlikely to have time to vote on the USMCA or any new trade agreements in 2018. From a procedural perspective, Republicans would need to negotiate with congressional Democrats to get an up or down vote with a simple majority or permit amendments to be added to get at least 60 senators on board. Either way, the trade agreement will need to appeal to both political parties.³

In the meantime, regardless of pending trade agreements, it’s important to focus on your personal financial goals, tolerance for risk and timeline when reviewing your financial strategy. Please let us know if you’d like help assessing your current financial situation.

Trade tensions continue between the U.S. and China, with talks expected between President Donald Trump and his Chinese counterpart, Xi Jinping, around the G20 summit in late November.⁴ While the United States has imposed tariffs on Chinese products, China has been entering a record number of trade agreements. In recent months, the country has met with Russia, Japan, South Korea, the European Union, South American nations and numerous African nations.⁵

The Trump Administration also has announced its intention, in 2019, to negotiate separate trade agreements with Japan, the United Kingdom and the European Union.⁶

Content prepared by Kara Stefan Communications.

¹ Knowledge@Wharton. Sept. 6, 2018. “NAFTA 2.0: What Will It Mean for Trade?” http://knowledge.wharton.upenn.edu/article/where-things-stand-on-nafta/. Accessed Oct. 29, 2018.

² Daniel Dale. The Star. Oct. 1, 2018. “Here’s what’s new in the U.S.-Mexico-Canada Agreement.” https://www.thestar.com/news/world/2018/10/01/follow-on-nafta-deal-includes-changes-on-auto-manufacturing-pharmaceuticals-dairy-and-intellectual-property.html. Accessed Oct. 29, 2018.

³ Adam Behsudi. Politico. Oct. 12, 2018. “Democrats could control trade deal’s fate.” https://www.politico.com/story/2018/10/12/trump-congress-vote-usmca-nafta-895495. Accessed Oct. 29, 2018.

⁴  Robert Delaney and Teddy Ng. South China Morning Post. Nov. 1, 2018. “Donald Trump and Xi Jinping have ‘good conversation’ about trade war ahead of G20 meeting.” https://www.scmp.com/news/china/diplomacy/article/2171301/donald-trump-says-he-had-good-conversation-xi-jinping. Accessed Nov. 8, 2018.

⁵ Peter Pham. Forbes. Sept. 14, 2018. “The Chinese Art Of Economic War.” https://www.forbes.com/sites/peterpham/2018/09/14/the-chinese-art-of-economic-war/. Accessed Oct. 29, 2018.

⁶ BBC. Oct. 17, 2018. “US moves to negotiate trade deals with Japan, UK, EU.” https://www.bbc.com/news/business-45885225. Accessed Oct. 29, 2018.

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