Trump would sideline USMCA for new auto tariffs

By U.S. EconomyFOXBusiness

USMCA's potential economic impact

Rep. Vern Buchanan, R-Fla., on the USMCA and the current political climate on Capitol Hill.

President Trump is willing to blow up a new trade deal between the U.S., Mexico and Canada to impose auto tariffs on Mexico, a threat that comes amid a full-court press by the White House to convince Congress to advance the very same agreement.

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Known as the United States–Mexico–Canada Agreement (USMCA), the deal would effectively prevent the U.S. from imposing new auto tariffs on the other two nations.

A side-agreement would allow Mexico and Canada to each export 2.6 million passenger vehicles tariff-free should Trump impose duties on the industry on national security grounds. Pickup trucks would be entirely exempt from any new tariffs.

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While the deal has yet to receive congressional approval -- backers are hoping to advance it by August -- the tariff agreement is already in effect.

Trump, however, appears willing to nullify the agreement – which will serve as an update to the North American Free Trade Agreement – before it is entirely enacted, telling reporters on Thursday that he would impose new auto tariffs on Mexico if, after a year, it does not do more to stem the illegal flow of drugs and people into the U.S.

"The USMCA is a great deal for everybody, but this is more important to me than the USMCA,” he said.

The comments mark a de-escalation from his threats to close the entire U.S.-Mexico border, but will likely raise concerns within the auto industry, as well as among supporters of the new trade agreement.

Over the past few months, the White House has spoken to over 290 lawmakers and their staff on the USCMA.

United States Trade Representative Robert Lighthizer has also addressed questions over the deal in numerous public hearings, as well as private meetings with Democrats on the Ways and Means Committee, the bipartisan Problem Solvers Caucus and the moderate Blue Dog Democrats.

He also spoke to the House Democratic Caucus at the invitation of Speaker Nancy Pelosi, D-Calif.

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Meanwhile, outside groups, including the U.S. Chamber of Commerce and the National Association of Manufacturers, intensified their lobbying efforts to try to advance the agreement.

Among the points of opposition from Democrats is a provision that would extend to 10 years the exclusivity that some advanced drugs receive in Canada and Mexico.