What The New Nafta Means For Trump, China And Trade In 2019 And Beyond

With a new trade deal signed at the G20 summit, President Donald Trump fulfilled his campaign promise to revamp our trade deals with Canada and Mexico. The U.S.-Mexico-Canada Agreement (USMCA) contains significant updates to 1994’s North American Free Trade Agreement — the trade deal that President Trump criticized throughout his campaign and promised to rewrite — including strengthening intellectual property and digital trade rules.


President Trump also left the summit with an agreement to defer any tariff increase on Chinese goods until Feb. 28, demonstrating a willingness to come to the table with China on trade issues. Originally the tariffs, already at 10%, were set to increase to 25% on Jan. 1. While this 90-day truce gives companies breathing room, tariffs of 10%-25% already in effect are hurting U.S. businesses and consumers.

Interestingly, the new Nafta trade deal signed at the same summit may further alienate China. The trade deal with Canada and Mexico contains many pro-innovation provisions, such as a ban on data localization, elimination of duties on digital goods such as books and music and sensible third-party liability protections for internet platforms.

Per the agreement, if any one of the three nations in the new Nafta makes a trade agreement with a nonmarket economy (e.g. China) without the approval of the other two, the other two can exit the agreement and form their own bilateral trade agreement.

The intent of the language is to disincentivize Mexico and Canada from negotiating with China. And after nearly 25 years of Nafta, the economies of Canada, Mexico and the U.S. are so closely intertwined that it’s highly unlikely any of the three would opt to cut ties to trade with China instead.

Tariffs Hurt U.S. Economy

Deferment of additional tariffs may or may not lead to a lasting truce; China and the U.S. have less than three months to negotiate further. It would be in Trump’s best interest to strike a deal, however.

According to a survey of more than 250 U.S. economists by the National Association for Business Economics, 90% believe the initial round of U.S.-initiated tariffs on Chinese products have already damaged the U.S. economy. Since the first round of tariffs went into effect, American companies have doled out $548 million more than last year to import goods from China according to The Trade Partnership, and the most recent data.

Tariffs hurt businesses of all sizes across all industries, but their impact is most pronounced for small businesses. At a USTR hearing on tariffs in August, hundreds of business owners testified about how these new taxes would hurt their business — cutting jobs, curtailing revenue and leading to higher prices for consumers.

New Nafta And China

Any increased costs on U.S. companies will invariably be felt by our Nafta partners, too, when their companies have to pay more for the American goods they need to succeed. Forbidding Canada and Mexico to lower their own barriers will not make the new Nafta pact more successful. It will only further exacerbate a rising North America cost scenario and ultimately hobble the ability of North American companies to compete on the global stage.

When negotiating with China over the next 90 days, the U.S. should capitalize on its renewed sense of cooperation and achievement with Canada and Mexico. Using the strength of our combined North American economy as negotiating leverage to actively engage with China, rather than punishing any one of the new Nafta members for doing so individually, will lessen the burden on the intricate North American supply chains, and could provide relief to the thousands of companies that rely on China as part of the global supply chain.

  • Shapiro is president and CEO of the Consumer Technology Association, the U.S. trade association representing more than 2,200 consumer technology companies, and a New York Times best-selling author. His upcoming book, “Ninja Future: Secrets to Success in the New World of Innovation,” will be released December 31. His views are his own.

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Originally posted 2019-09-19 23:29:35.


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