ACA: New Trade Deal Could Raise Vehicle Prices
Jan. 2, 2020—The U.S.-Mexico-Canada Agreement (USMCA) is meant to replace the current NAFTA agreement.
According to Gabrielle Hopkins, vice president of federal affairs for the Auto Care Association, this new agreement changes the requirements for the percentage of goods that have to be produced in the U.S, which includes automotive manufactured vehicles. The change is an increase from 62.5 percent to 75 percent. The new agreement also includes a labor provision, stating that certain cars need workers to be making at least $16 per hour.
"Because of the increase in components from North America and the $16 an hour wage, this will likely increase the price of vehicles," Hopkins says. "This is a benefit for auto repair shops because people will keep their cars longer and get them repaired more often."
Hopkins says the United States has a very strong relationship with Canada and Mexico. She says 52 billion auto parts come from Mexico and Canada is the U.S.'s number one exporter.
"There was a lot of talk that if the USMCA agreement didn't pass, the president would leave NAFTA altogether," Hopkins says. She went on to say that there were even talks about closing the border between Mexico and the U.S.
Hopkins says the Auto Care Association (ACA) is very supportive of the new agreement, saying the USMCA agreement protects the overall supply chain for the automotive industry. Recently, Bill Hanvey, president and CEO, Auto Care Association, released a statement standing behind the Trump Administration's decision on the USMCA
“We applaud the Trump administration and Congress for reaching a deal and moving the U.S.-Mexico-Canada Agreement (USMCA) towards ratification," the statement read. "The trilateral agreement will strengthen trade and maintain tariff-free market access to two of our most important trading partners, accounting for more than 70 percent of total U.S. auto parts exports. We encourage Congress to move swiftly to ratify the bill to maintain our industry’s global supply chain, protect American jobs and ensure market stability for current and future investments."
Hopkins says the con to this agreement is that it is up to negotiation every six years, meaning they could modify the agreement or even reverse the decision.
The next step for the USMCA agreement is to go through the Senate, where it will have 45 days to pass, and will then go on to the House for a final vote. Hopkins says because the Senate isn't allowed to amend the agreement, it will likely pass.