Canada Avoids Auto Tariff War With New US, Mexico Trade Deal
Canada has signed on to a new trade pact with the United States and Mexico that will replace the North American Free Trade Agreement (NAFTA).
Dubbed the United States-Mexico-Canada Agreement, or USMCA, the deal was finalized late on September 30 just before a deadline imposed by the US government and a month after the US and Mexico had crafted an agreement between their two countries.
According to Politico, the USMCA resolves a handful of potential problems for Canada, including tariffs on the exportation of cars and car parts to the U.S., as well as NAFTA's Chapter 19, which is effectively a dispute-resolution mechanism for when one country wants to challenge another's anti-dumping policies.
An auto industry side agreement will allow Canada to export up to 2.6 million cars to the US every year, above which the US would charge duty of up to 25 percent. Right now, 1.8 million cars move south across the border annually. The USMCA also allows Canada to export $32.4 billion in car parts to the US.
What the deal doesn't eliminate are US tariffs on Canadian-produced steel and aluminum. When US President Donald Trump announced those duties, Canada fired back with its own tariffs on US-made things like bourbon and household appliances. Politico reports that there will likely be further negotiations to try to resolve that dispute.
According to the CBC, Canada produces about five percent of the world's steel and accounts for just under one percent of global aluminum production. Last year, Canada exported about $24 billion worth of the two metals to the US.
While all three countries have tentatively agreed to the USMCA's terms, its passing still depends on US Congress: if the Democratic party takes control of the House of Representatives in next month's midterm elections, it's possible they can delay the deal's passing to punish Trump.
Canada made concessions on dairy imports from the US, but Jerry Dias, president of Unifor, the union that represents many of Canada's auto industry workers, said the USMCA "will yield benefits for Canadian workers and the economy."
