Analysis
January 5, 2020
USMCA: Boon or Bust for Auto Industry?
Written by Sandy Williams
The Congressional Budget Office expects the U.S.-Mexico-Canada Agreement to result in higher than expected tariff revenue for the United States on motor vehicles and parts due to stricter rules of origin and labor value content requirements. Included in the revenue calculation is an estimated $3 billion in tariffs to be paid by automakers over the next decade.
The USMCA will require 75 percent regional content, up from 62.5 percent in NAFTA to receive tariff-free access between Canada, Mexico and the U.S. Seventy percent of steel and aluminum purchased for production must be produced in North America. In addition, a labor value requirement, aimed at bringing low Mexican wages more in line with those of its northern neighbors, stipulates that 40 to 45 percent of vehicle content must be made by workers earning more than $16 per hour.
