The New NAFTA
On January 29, 2020, President Trump signed into law the United States-Mexico-Canada Trade Agreement, an update to the North American Free Trade Agreement (NAFTA). NAFTA first went into effect January 1,1994. NAFTA eliminated tariffs and trade barriers between the three nations. This allowed for free trade in North America for the last 25 years.
In September of 2018, the three countries re-negotiated the terms of the treaty and came up with a new arrangement: The United States-Mexico-Canada Agreement (USMCA). The USMCA has now been signed into law by governments in Mexico and the United States. However, it will not take effect for any country until it is also approved by the Canadian parliament. The new deal comes with a sixteen year expiration date and a mandatory review every six years in order to approve an extension.
What is the USMCA?
USMCA is more of an updated NAFTA than a complete overhaul, and the main purpose of the original agreement (allowing for free trade between the three countries) is still intact. Most of the changes made apply to the auto manufacturing, dairy, and agricultural sectors. It will also have many benefits for US companies that have other types of manufacturing supply chains in Mexico.
Some of these beneficial changes include:
- Increased de minimis levels will allow more goods to be taken across the borders without duties. Mexico is bumping their de minimis value to USD$50 and duty-free shipments to USD$117
- New sections on digital trade, e-commerce regulations, and intellectual property will help smaller businesses to reach new markets and protect against counterfeit products
- Increased protection for factory workers will continue to encourage sustainability in manufacturing across all sectors
Manufacturing in Mexico
When it comes to manufacturing in Mexico, free trade is definitely an advantage and the USMCA continues to support that. If you’re considering moving your supply chain outside of China, Mexico could be a good fit. The country has established manufacturing in areas like apparel, furniture, and electronics. To find out more, check out our detailed profile on manufacturing in Mexico.