Toronto, Ontario — On Thursday, the United States House of Representatives approved a new North American trade deal including a last-minute alteration to the requirement calling for 75 percent of the steel and aluminum used in auto production to be purchased in North America.
The biggest changes made to the trade deal require to increase North American content in cars and trucks built in the United States, Canada and Mexico. While NAFTA required 62.5 percent of car content to be North American, the new deal requires 75 percent of steel and aluminum used in cars to be from a North American source.
In addition, 40 percent to 45 percent of vehicle content must come from high-wage areas that pay more than $16 an hour—namely in the U.S. and Canada. Thus, some vehicles assembled in Mexico mainly with components from Mexico and outside the region may not quality for U.S. tariff-free access.
The U.S. Congressional Budget Office estimates that automakers could pay nearly $3 billion more in tariffs over the next decade for cars and parts that will inevitably not meet the higher regional content rules.
The House passed the legislation implementing the U.S.-Mexico-Canada agreement by a vote of 385 to 41. The House voted to send the measure to Senate, but it is unclear when the chamber will take it up.
The UMSCA trade pact was first agreed upon in Sept. 2018 and will replace the 1994 North American Free Trade Agreement (NAFTA). Since becoming president, Trump has vowed to either quit or renegotiate NAFTA, which he blames for the loss of millions of U.S. factory jobs to low-wage Mexico.
