Steel Market News: New trade agreement, USMCA, includes key provisions to the auto industry to encourage more domestic car production.
Just before we turned the page to October the U.S. and Canada reached a deal to revise the North American Free Trade Agreement. The agreement allows Canada to join an earlier established accord set by the U.S. in Mexico in August. While steel and aluminum tariffs remain unresolved between the nations, one of the main provisions of NAFTA 2.0 or the U.S.-Mexico-Canada Agreement will impact the auto industry. Here’s a look at the provisions:
USMCA Auto Industry Provisions
- 75% of auto components to be built in North America, up from 62.5%.
- 40-45% of auto components will have to be manufactured by laborers making at least $16 an hour.
- Mexico and Canada are each allowed a tariff-free quota of 2.6 million passenger cars to export to the U.S. if auto tariffs are imposed.
- Pickup trucks will be exempted entirely.
- Mexico and Canada will receive auto parts exemptions of $108 billion and $32.4 billion respectively.
The USMCA avoids tariffs though at the same time it makes it harder for automakers to build cars cheaply in Mexico and Canada. Both Volkswagen and Audi have several factories in Mexico that export a large amount of its production to the U.S. Toyota has plants in Canada for manufacturing a number of different vehicles as well. The agreement is still subject to approval by U.S. Congress.
It remains to be seen whether or not the new trade agreement will have a trickle down effect on the used car market or on scrap metal prices. As we wait and see the impact of this agreement we will continue to breakdown markets and discuss relative news to the auto recycling industry. Stay in the conversation with Market & Metals and feel free to share this post on your site, via email, Facebook or LinkedIn!.