USMC-what? Why You Should Care About ‘New NAFTA’ | U.S. News Decision Points

Iran. Ebola. That creepy flesh-eating larva thing. The cost of living. The jobs figures.

I get it. You’re not closely following the discussion around renewing the trade deal between the United States, Mexico and Canada (USMCA, or “new NAFTA” if you’re a boomer). But wow is this important.

In many ways, the business model of journalism is that you indirectly pay me to pay more attention to things than you want to. That’s definitely true when it comes to America’s biggest trade deal, which helps to bind North America in one big blended economy.

So I understand this might feel like a bit of an abstract conversation. But it will affect your supermarket prices, energy costs and how we build and pay for all kinds of heavy machinery – including cars and farm equipment.

Canada is in a “technical recession,” which really just means that, whatever the “vibes” are, the economy has suffered two consecutive quarters of negative economic growth. That means Canada is vulnerable to new American demands.

Sure enough, there are new American demands. The Wall Street Journal reports the U.S. is pushing for a requirement that “half of the components and materials in an automobile” come from U.S. sources in order to qualify for lower tariffs.

“The pact currently requires three-quarters of a vehicle’s materials to come from North American sources, but has no U.S.-specific content requirement,” the Journal says.

This kind of requirement could make new cars pricier.

The Trump administration’s theory is that these sorts of demands will lead to more manufacturing on U.S. soil. The trade deal, which Trump signed in his first term, provides for periodic renegotiation of an arrangement that combines more than 500 million people, a $30 trillion GDP and a trade volume of $1.7 trillion.

The conversation with Canada this year started off on the wrong foot, with Trump pushing a social media message that the neighbor to the north should be America’s “51st state!” The U.S. ambassador to Ottawa reposted it.

The message came as Canada’s trade minister visited Washington. The United States and Mexico had already started renegotiations. The United States and Canada had not.

No one expects the three countries to renegotiate the trade deal by their self-imposed deadline of July 1.

While Trump has largely exempted Canada and Mexico from his country-specific tariffs, import duties have hit Canada’s autos, aluminum, steel and lumber.

Trump has made increasingly critical comments of the USMCA trade pact, which he negotiated and signed in his first term.

But back in 2020, he called it “the fairest, most balanced and beneficial trade agreement we have ever signed into law. It’s the best agreement we’ve ever made.”

One of the chief complaints from Washington is so-called “Mexico-washing,” a process by which imports from China undergo relatively minimal changes to qualify as products from Mexico that benefit from the USMCA’s protections.

So keep your eyes on negotiations over cars and car parts, which have the potential to increase sticker shock on the lot down the road.

The Trump administration recently threatened new tariffs on a range of countries it alleges have failed to enforce laws that forbid goods made with forced labor, including Canada and Mexico. (The prohibition is broadly seen as a slap at China.)

“The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable,” said U.S. Trade Representative Jamieson Greer. “This creates a dynamic where American workers are forced to compete globally on an uneven playing field.”

The administration has been looking for ways to cement its tariffs after the Supreme Court ruled earlier this year that many of Trump’s signature import duties were illegal.

We’ll have to wait and see how all of this will affect the price of your avocados or car repairs.