MAGA v NAFTA: The Meh-HE-Co Edition

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The Trump administration is close to striking a deal with Mexico on a revamped North American Free Trade Agreement, analysts said, but thorny issues are yet to be resolved with Canada, the third party in the trilateral pact.

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Analysts who have been closely monitoring the talks say that U.S. and Mexican trade officials are working out details and that a deal still could unravel. No issue has occupied as much time as NAFTA’s auto rules. Cars account for the biggest trade among the three countries, and Trump and other critics blame NAFTA for the U.S. trade deficit with Mexico and the loss of domestic manufacturing jobs.

NAFTA’s current rules specify that at least 62.5 percent of the content of cars come from North America to qualify for zero tariffs; anything lower than that threshold subjects a vehicle to a 2.5 percent duty for cars and 25 percent for trucks and sport utility vehicles.

The understanding with Mexico would raise the regional-content level to 70 percent or higher and set a similar rule of origin for steel and aluminum in vehicles. The new rules also would include language aimed at having more cars and parts produced by workers who make wages well above the average low rates in Mexico. The hope is that more jobs would stay in the U.S. and that European and Japanese automakers would source more parts in the U.S. to avoid the tariffs.

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