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Gus Van Horn blog

Reblogged:USMCA: The Clumsy Name Is the Best Part

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The USMCA trade deal -- President Trump's replacement for NAFTA -- seems to be on track to regulate international trade in most of North America. The good news, at least according to a couple of headlines I recall, was that it wasn't riddled with tariffs. The bad news is that it doesn't need tariffs to waste our money: Other government meddling will take care of that. For example:

Image via Wikipedia.
Nafta [sic] required automakers to produce 62.5 percent of a vehicle's content in North America to qualify for zero tariffs. The new agreement raises that threshold, over time, to 75 percent. That's meant to force automakers to source fewer parts for an "Assembled in Mexico" (or Canada) car from Germany, Japan, South Korea or China.

For the first time, the new agreement also mandates that an escalating percentage of parts for any tariff-free vehicle -- topping out at 40 percent in 2023 -- must come from a so-called "high wage" factory. The agreement says those factories must pay a minimum of $16 an hour in average salaries for production workers. That's about triple the average wage in a Mexican factory right now, and administration officials hope the provision will force automakers to shift suppliers from Mexico to Canada or the United States.
The above comes from the New York Times, which correctly points out in the next paragraph that this is likely to cause cars manufactured in this  trade zone to cost more.

But Trump did get one thing right: At least we won't be calling this meddlesome treaty a "free trade" agreement.

-- CAV

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