The sky isn’t falling.
That’s the message coming from Corporate America after President Trump reached a deal to revise the North American Free Trade Agreement. The accord, which covers $1.2 trillion in commerce, arrived after months of negotiating amid concern that Trump would exit the treaty with Mexico and Canada and upend global supply chains.
“We were concerned when hanging over our heads was total withdrawal,” said Matt Priest, chief executive officer of the Footwear Distributors and Retailers of America. “To put that to bed is great and to have something that includes Canada, and not just Mexico, is fantastic."
The Trump administration had already agreed last month to an updated relationship with Mexico, which increased pressure on Canada to make concessions to join the deal. The accord -- now dubbed the United States-Mexico-Canada Agreement, or USMCA-- needs to be approved by lawmakers from all three countries.
The benefits for U.S. companies that rely on duty-free trade with Canada and Mexico are largely that Nafta will live on, with a few modest tweaks. Here’s a rundown by industry:
Autos
Stocks of U.S. automakers including General Motors Co. rose on Monday after they avoided the prospects of steep tariffs and disruption to supply chain that spans all three countries.
But there are concerns, with some of the biggest changes in the agreement coming in vehicle production. A car must have 75 percent of its parts come from the region to receive duty-free designation, up from 62.5 percent. It also requires that at least 40 percent of a car is made by workers whose pay averages more than $16 an hour, which could push production from Mexico’s cheaper labor market to the U.S.
“New regional value content requirements mean that automakers will not able to source parts as freely, so there will be added costs,” Ivan Drury, senior manager of industry analysis for car-shopping website Edmunds, said in an emailed statement. “Given that new vehicle prices are already stretched to record highs, things could take an ugly turn for consumer wallets.”
The deal could shift auto-parts production, but mostly those used by European and Asian carmakers building vehicles in Mexico for the U.S., said Kristin Dziczek, analyst at the Center for Automotive Research in Ann Arbor, Michigan. But in many cases, foreign carmakers would choose to pay a fine because it would be cheaper than spending to relocate production for big items, like engines and transmissions, that they import into the Nafta region.
Consumer
For retailers and consumer brands, the threat of losing cheap imports was a huge concern. Constellation Brands Inc. was at the top of the list, with its main business being producing beer brands Corona and Modelo in Mexico and shipping to the U.S. But now those fears have been eased.