Jay Timmons, President and CEO of the National Association of Manufacturers (NAM), highlighted the USMCA as a significant success for North America. He emphasized that the agreement has been instrumental in strengthening manufacturing across the U.S., Canada, and Mexico, leading to increased investment and the relocation of supply chains from strategic competitors like China back to North America. Timmons stated that manufacturers supported the USMCA from its inception through its bipartisan congressional approval, moving billions of dollars in investment.
The USMCA, which replaced NAFTA, included a requirement for 75% of automotive products to be made in North America for duty-free treatment, up from 62.5% under its predecessor. A new report from NAM, "Built to Spec: USMCA Supports Millions of American Jobs and Drives U.S. Manufacturing Dominance," indicates that 15 of 18 manufacturing sectors have seen increased exports to Canada and Mexico since the agreement's ratification. Examples include Rheem Manufacturing nearly quadrupling its capital investments to $100 million and Thermo Fisher Scientific investing $2 billion, with $1.5 billion dedicated to expanding domestic manufacturing operations.
Despite the positive impacts, the U.S. has decided against renewing the USMCA for another long term, opting instead for annual reviews. This decision, announced by U.S. Trade Representative Jamieson Greer, means the pact will remain in force for a decade but will be subject to ongoing negotiations and potential changes. The U.S. is pushing for more stringent requirements, including a proposal that 50% of cars be made in the U.S., a stance both Mexico and Canada view as a "red line." This could lead to price increases of 5%-7% on affected car models due to higher production costs.
The three countries engaged in $1.9 trillion in trade annually, with Canada and Mexico becoming America's top two trading partners, surpassing China. While the original USMCA provided stability, the shift to annual reviews introduces uncertainty for businesses, particularly for automakers, farmers, and energy companies. The USMCA aimed to enhance North American co-production, streamline customs, and protect intellectual property, and leaders are now discussing how to further strengthen the agreement amidst these changes.
