Carmakers in N. America Applaud New NAFTA Trade Deal

The tentative agreement to include Canada in a plan to update NAFTA has eased worries by Detroit’s Big Three carmakers about the Trump administration’s trade policy, even though the deal will alter their supply chains.

General Motors Co. describes the would-be pact “vital” to the success of the North American auto industry. Ford Motor Co. concurs, saying the deal will support the region’s “globally competitive” auto industry.

The United Auto Workers union agrees that the pact could boost jobs in the U.S. and improve labor laws in Mexico. But it says it will withhold judgment, citing a “history of loopholes” for the “disastrous” 24-year-old North American Free Trade Agreement.

President Donald Trump dubs the tentative trilateral deal the U.S.-Mexico-Canada Agreement. If approved by the three countries, the accord will enable U.S. carmakers to continue to use most of the manufacturing network developed after the North American Free Trade Agreement took effect 24 years ago.

But USMCA also will hike local content requirements to 75% from 62.5% and demand a shift in the production location of some high-value components. The measure also requires that about 45% of the content of vehicles made in North America be produced by workers who are paid at least $16 per hour.

The draft deal will exempt 2.6 million imported vehicles each from Canada and Mexico from a possible 25% import tariff being considered by the Trump administration on all foreign-made vehicles.

LMC Automotive estimates that the U.S. imported a combined 4.1 million vehicles from Canada and Mexico last year, well below the 5.2 million units that would be covered by USMCA.