- Officials reached the US-Mexico-Canada Agreement after a year of negotiations Sunday.
- President Donald Trump portrayed it as a groundbreaking pact.
- But analysts say the new agreement isn’t too different from the original NAFTA deal.
While President Donald Trump hails a revised NAFTA as the “most advanced trade deal in the world,” some analysts are wondering what all the hype is about.
Officials reached a breakthrough on the US-Mexico-Canada Agreement in 11th-hour negotiations Sunday night, calming fears that the trilateral deal could be scrapped when a self-imposed deadline hit hours later. But analysts say the new deal doesn’t look very different from the trade dynamics that have governed the US and its neighbours for decades.
“New deal, with a new name, but aside from dairy access and some bells and whistles, hardly a major rewrite that warranted so much wasted time over a 13-month long period of negotiations,” David Rosenberg, chief economist at Toronto-based Gluskin Sheff, said in a note sent out to clients.
To be sure, USMCA resolves previous sticking points and includes major concessions from both sides. For example, it opens up about 3.5% of Canada’s protected dairy market to US farmers and allows Canadians to purchase five times the amount of foreign products online without paying an additional import tax.
But Eric Winograd, a senior economist at AllianceBernstein, thinks the changes are “entirely trivial” from a US perspective. “If those sound like small numbers it’s because they are,” he said. “There is no reason to change US economic forecasts as a result of the deal. No doubt the Administration will herald the accord as a game-changer, but in economic terms it certainly is not.”
Building on a previous agreement between the US and Mexico, USMCA also revamps production standards for automakers across the three countries. Under the new agreement, three-quarters of a car’s parts must originate from North America in order to be exempt from duties. It also offers Mexico and Canada partial protection from broader auto tariffs the Trump administration has threatened to impose, but falls short of marking those countries exempt.
“To me it seems like it’s a stonewashed and ripped NAFTA, if you will, rather than a modernised agreement,” Hugo Perezcano Díaz, a director at the Center for International Governance Innovation and a former trade official for the Mexican government, said.
Still, USCMA represents a major victory for President Donald Trump, who has vowed to rewrite global trade relationships since the campaign trail. It won early approval from businesses and lawmakers across the aisle and even put the Republican administration in a rare alliance with labour unions.
The new agreement also signals the Trump administration is open to keeping trade agreements with some countries alive, analysts say, although most fell short of including China in that list.
“In a sense, we look at this as something that does have a constructive message both for North American trade and for fears around trade wars more broadly,” Bruce Kasman, a JP Morgan economist, said. “What we wouldn’t do is extrapolate this to the US-China relationship.”
Negotiations between Washington and Beijing remain deadlocked after the Trump administration followed through with another round of import taxes on Chinese goods last month, leading to retaliatory tariffs and the cancellation of high-level trade talks.
“The US relationship with China is much more complicated than its relationship with Canada,” Rosenberg agreed. “And of course the stakes are considerably higher when dealing with China – the Chinese have leverage over the US that Canada simply doesn’t have.”