Trump comes through on pledge to rewrite NAFTA

President Donald Trump signed the replacement for the North American Free Trade Agreement into law on Jan. 29, 2020, fulfilling a campaign promise to rewrite a deal that he labeled "a disaster."

The new agreement, named the U.S.-Mexico-Canada Agreement, is a bipartisan effort that mostly updates NAFTA, which had been in place since 1994 and had been the largest American trade deal ever signed. 

The USMCA adds significant changes for the auto industry and implements new policies on digital trade, intellectual property protection, the Canadian dairy market, and labor and environmental standards. 

Trump made reordering U.S. trade policy a top administration priority, saying previous free-trade deals had led to a hollowing-out of U.S. manufacturing and job losses. In his first week of office, he withdrew the U.S. from further negotiations on the Trans-Pacific Partnership, a mammoth trade deal between the U.S. and 11 Pacific Rim countries that would have represented nations with 40% of global gross domestic product. It was the centerpiece of former President Barack Obama's trade policy to create a counterweight to China. The Trump administration also won revisions to the 2012 U.S.-Korea Free Trade Agreement.

The NAFTA renegotiations began in May 2017 and continued through eight rounds of formal talks. The U.S. entered the discussions taking a hard line, pushing for a requirement that 50% of an automobile's content originate in the U.S. in order to qualify for a tariff exemption. U.S. negotiators also pushed for an early sunset clause, so that the pact could be renegotiated within five years. 

Trump ended up backing down on both points. The final deal does not include a U.S.-content minimum for autos but does increase the percentage of a vehicle's content that needs to be made in one of the partner countries in order to avoid tariffs. Under the new deal, automobiles must have 75% of their components manufactured in Mexico, the U.S., or Canada to qualify for zero tariffs, compared with 62.5% in the original NAFTA. The new pact also calls for the three partners to review the pact after six years, with a 16-year sunset clause. 

In 2018, Trump signed the revised pact alongside former Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau at the G20 summit in Argentina. He threatened to terminate NAFTA altogether if Congress didn't work to ratify the new deal.  

After months of talks, Trump was eventually able to win congressional passage because of changes in the pact's enforcement, labor, environmental and drug-pricing provisions, which earned the support of Democrats and labor unions. 

On Dec. 19, 2019, the House voted 385-41 to approve the deal, with 193 Democrats backing it. The pact cleared the Senate 89-10 on Jan. 16. No Democratic lawmakers were present at the January signing ceremony. 

Mexico and Canada have ratified the deal.

The new treaty expands the U.S. reach into the Canadian dairy market. On auto parts, in addition to the higher North American content thresholds, it requires that by 2023, 40-45% of the parts be made by workers who earn at least $16 an hour. 

Canada and Mexico account for about 30% of U.S. goods exports and imports, according to a 2019 Census Bureau report on top trading partners.

In a compromise with Democrats that included increased workers' rights and environmental protections, the Trump administration won approval for a renegotiated NAFTA, as Trump promised. We rate this Promise Kept.