Keeping you up to date on the ongoing trade war. Links to related articles and our background videos below.
- US-Mexico Deal: Mexico and the US have reached a deal in principle that must be approved by legislatures in both countries. Could be critical step toward rework of NAFTA agreement.
- Trying to get Canada on board: Upon announcement of the US-Mexico deal, the US and Canada immediately started discussions to get Canada into the agreement. Although agreement did not come quickly, discussions are ongoing and reports are optimistic. Dairy appears to be the major outstanding issue.
- Ongoing preparation for more China tariffs: The Trump administration continued preparing for additional tariffs on China. The plan is to put tariffs on an additional $200 Billion of Chinese products, in addition to the $50 Billion that already has tariffs. Unclear as yet when the additional tariffs will go into effect and whether will be all at once or in stages.
- Japan might be the next target: President Trump mentioned that Japan could be the next front for his trade initiative. Japan has been impacted or threatened by other aspects of the trade conflict, including steel and cars. But Japan has yet to be specifically addressed as Mexico, Canada, the EU, and China have.
- Potential for political confrontation in US: The deal with Mexico could represent the first item from Trump’s trade efforts that requires congressional approval. Opposition could come from both sides of the aisle.
Commentary: Why the US-Mexico Deal Could be a Big Deal
The US-Mexico trade deal virtually assures that it will become more expensive to make cars in Mexico, which raises the possibility that some auto manufacturing will leave Mexico. But those jobs won’t necessarily return to the US, unless the US makes it equally expensive to make cars in other countries. This is why the Mexico deal might just be the first step toward a broad tariff on autos, which could have a huge impact on the US economy.
Some parts of the announced deal are described in detail, others are described in general and details will be worked out later. Key components of the deal are as follow:
- 75% of the content in automobiles must be sourced in North America up from 62.5%
- 40%-45% of auto content must be produced by workers earning at least $16 an hour.
- Copyright holders will have full copyright protections in both country’s markets countries.
- The deal calls for a 16-year agreement with a provision for review after 6 years.
- Dispute settlement panels will remain for certain industries, but not others.
What the U.S.-Mexico Trade Pact Says
Trump’s new trade deal with Mexico threatens country’s role as a car hub
Trying to get Canada Onboard
Canada will likely not have a problem accepting provisions related to local content and labor for autos. Agriculture, particularly dairy, could be a sticking point.
Trade talks with Canada will restart next week as Trump seeks a deal in 90 days
Canada and U.S. Meet as Trump Moves Ahead With Mexico Trade Deal
Canada’s Freeland sees ‘very good progress’ in NAFTA trade talks
Ongoing preparation for more tariffs on China
Talks with China have yet to yield tangible progress. Trump administration seems determined to implement additional tariffs, perhaps as early as the 9/6/18, although the actual timing is uncertain.
Trump’s reported plans for tariffs on $200 billion in China goods, Apple and other stocks at risk
Trump reportedly wants to hit China with tariffs on $200 billion worth of goods, which would be a massive escalation of the trade war
Japan might be the next target:
After specific efforts, discussions, or investigations relative to steel, autos, Canada, Mexico, the EU, and China, Donald Trump indicates the next area of focus for his trade initiative might be Japan.
It looks like Trump has found the next big target in his trade war — Japan
Potential for political confrontation in the US
Whether Canada is included or not is just one item that could be a sticking point in terms of congressional approval. Actual consideration by congress might have to wait until after the mid-term elections.
U.S.-Mexico trade pact faces scrutiny from lawmakers at home
Trump warns Congress on new NAFTA, tells Canada it could be ‘out’ in a new trade deal