USMCA Deal

USMCA Deal

The USMCA deal– standing for “United States Mexico Canada Agreement” has been unveiled today. The proposed “USMCA” deal which has been set to replace NAFTA has faced some criticism from respective industries across Canada and the United States.

The proposed deal is a 1000-page document that regulates the food and dairy industry, the medical (prescriptions) industry, copyright and trademark protections between the countries, the auto industry and the retail industry. Other notable impacts on trade include the inclusion of “Chapter 19” which outlines arbitration provisions between the United States and Canada.

Biggest hit industries include the auto industry and the dairy industry. Under the proposed agreements, 10 Asia-Pacific countries would have access to the dairy market, equaling 3.25% of Canada’s annual milk production. The U.S. will have access to 3.6% of Canada’s annual milk production.

Impact on the Dairy Industry

• The USMCA would allow American farmers to have greater access to Canada’s dairy farms and production ~ 3.6% worth.
• Removal of Canada’s current Class 7 classification which allows Canadian farmers to charge less for certain dairy products.
• More American dairy products on the shelves of Canadian supermarkets.

Impact on the Steel Industry

• Steel tariffs that have been recently imposed by the Trump Administration could be upheld.
• Current tariffs have been imposed at a rate of 25%

Impact on the Auto Industry

• No hard limits on auto exports
• Possible imposition of 232 tariffs on autos from Canada to the U.S. A Section 232 tariff would impose a 20-25% duty on cars and auto parts imported into the U.S. from Canada.
• Allows certain provisions to allow car manufacturers to export cars and parts tariffs are free up to a certain amount (above current amounts)

While the proposed USMCA deal will no doubt have longstanding effects on all of Canada’s and America’s industries, U.S. Congress must review the proposed deal within a 60-day mandatory period. During the review period, certain concessions may be made and others may be re-negotiated.