After months of negotiations, President Trump, Canadian Prime Minister Justin Trudeau and Mexico’s then-president, Enrique Peña Nieto, on Friday signed a new trilateral trade agreement on the sidelines of the G-20 summit in Buenos Aires, Argentina.
However, the pact, aka the United States-Mexico-Canada Agreement (USMCA), faces an uncertain future and opposition from many quarters within all three countries. There remain questions about U.S. tariffs on Canadian and Mexican steel and aluminum imports, which are still in effect, and Mexico’s new president, Andrés Manuel López Obrador, was inaugurated on Saturday.
In addition, Democrats are taking over the U.S. House of Representatives in January, and Congress must approve the deal.
“This has been a battle, and battles sometimes make great friendships,” Trump said, flanked by Peña Nieto and Trudeau, before signing the agreement. Trump said it was “the largest, most significant, modern and balanced trade agreement in history. All of our countries will benefit greatly. It is probably the largest trade deal ever made.”
The USMCA would replace the 24-year-old North American Free Trade Agreement (NAFTA), which Trump has vilified as the “worst trade deal” since before taking office.
For the oil and gas industry, the most notable provision of the USMCA is the recognition of Mexico’s “direct, inalienable and imprescriptible ownership of hydrocarbons.”
Tariffs Still On Table
From the start of negotiations, auto manufacturing had a high profile. Under the USMCA, 75% of a vehicle’s value must be produced in North America, versus 62.5% under NAFTA, and 40-45% of a car must be produced in factories where workers are paid at least $16/hour. For now, a 25% tariff on steel and a 10% tariff on aluminum imported from Canada and Mexico remains in effect.
Still, the trade pact was signed four days after General Motors Co. (GM) announced that it would close factories in the United States and Canada, eliminating up to 14,800 jobs. Trudeau called the GM news “a heavy blow” to both nations, but he also used it as an opportunity to prod Trump over the ongoing tariffs.
“Donald, it’s all the more reason why we need to keep working to remove the tariffs on steel and aluminum between our countries,” the Canadian leader said.
The White House enacted the steel and aluminum tariffs in June. At the time, Commerce Secretary Wilbur Ross said the decision to impose the tariffs was made because of insufficient progress in renegotiating NAFTA. But Ross was reportedly absent from the signing ceremony and the G-20 summit altogether, leading to speculation about his future in Trump’s cabinet.
Congressional Approval Not Assured
In Washington, DC, lawmakers on both sides of the aisle began to line up in support — and opposition — to the trade pact.
“For the new trade agreement to receive a majority support in Congress — including from members like myself, who have long opposed NAFTA and demanded improvements — it must prove to be a net benefit to middle-class families and working people in our country and must have strong labor and environmental protections, which in the present deal are too weak,” said Senate Minority Leader Chuck Schumer (D-NY).
However, in a letter to the White House, 12 Republican senators said they “stand ready to assist” Trump in getting Congress to approve the USMCA, but they also urged the president to act quickly.
“We are concerned that if the administration waits until next year to send to Congress a draft implementing the bill, passage of the USMCA as negotiated will become significantly more difficult,” the GOP senators penned in their Nov. 20 letter. It was signed by Sens. Lamar Alexander of Tennessee, Ted Cruz of Texas, Steve Daines of Montana, Jeff Flake of Arizona, Deb Fischer of Nebraska, Ron Johnson of Wisconsin, Jon Kyl of Arizona, James Lankford of Oklahoma, Mike Lee of Utah, Rob Portman of Ohio, Ben Sasse of Nebraska and Pat Toomey of Pennsylvania.
U.S. Trade Representative Robert Lighthizer reportedly said the Trump administration planned to work with Congress to get its approval.
“The negotiations are not going to be reopened, the agreement has been signed,” Lighthizer said, according to reports. “We still need to put together an implementing bill so there are things that we can do. But I want to remind everyone that this was negotiated from the beginning to be a bipartisan agreement. It was the president’s instruction to me from the beginning that he wants a bipartisan agreement.”
Lighthizer also reportedly said “a very high number of Democrats” support the USMCA. “I’ve been in discussions with a variety of Democratic leaders…and they’ll be very much involved in the process moving forward and will have an influence, a strong influence,” he said.
Trump met with China’s President Xi Jinping on the sidelines of the G-20 summit on Saturday. According to reports, Trump had agreed not to raise an existing 10% tariff on $200 billion worth of Chinese products to 25% after Jan. 1, as both sides in the escalating Sino-U.S. trade dispute look to continue negotiations over the next 90 days.
The Trump administration enacted the 10% tariff in September. Beijing immediately retaliated with $60 billion worth of taxes on American goods, including a 10% tariff on liquefied natural gas.
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