Canada has officially joined the United States and Mexico in forming a new trade arrangement that will replace NAFTA. Dubbed the United States-Mexico-Canada Agreement (USMCA), the deal features language relevant to a number of industries, including dairy and steel.
It also brings new automotive standards that will effect how car companies in Detroit do business over the coming years. One such regulation, which would be applied incrementally, aims to reduce the outsourcing of U.S. auto industry jobs.
The rule states that 30% of each automobile sold in USMCA member countries must be built by high wage workers, who make at least $16 per hour. In the year 2023, that requirement would increase to 40%. President Donald Trump says this will result in more vehicles and auto parts being made domestically.
“We will be manufacturing many more cars,” says President Trump. “And our companies won’t be leaving the United States, firing their workers, and building new cars elsewhere. There’s no longer that incentive.”
The new trade deal would also raise the percentage of each car that must be made in North America in order to be sold in the market. Manufacturers who can’t meet the requirement will face tariffs, for what President Trump calls the “privilege” of market access.
“And that’s what it is, it’s a privilege,” he says. “We don’t take it as a privilege. It’s a privilege for them to do business with us. And I’m not talking about [Mexico and Canada], I’m talking about everybody. It’s a privilege for China to do business with us. It’s a privilege for the European Union…Japan, every country.”
The USMCA would mandate that 75% of each car be produced in the U.S., Mexico, or Canada in order to avoid tariffs. That’s 12% more than what was required under NAFTA.
The new trade deal must still be approved by Congress before it can take affect.