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November 12, 2018

Leaders Will Formally Sign USMCA Later This Month

Officials from Canada, Mexico, and the United States will officially sign the new United States-Mexico-Canada Agreement (USMCA) on Nov. 30 in Buenos Aires, Argentina, Reuters reported last week. Before the pact can go into effect, however, the legislative branches in each country will need to approve it. It also appears trade negotiators are trying to work out some changes to the text of the agreement.

Despite the last minute wrangling, Canadian Prime Minister Justin Trudeau also suggested last week that the Canadian parliament might approve the deal even if the United States has not lifted its Section 232 tariffs on steel and aluminum exports. Trudeau said, “We would much rather have genuine free trade with the United States so we’re going to continue to work as soon as we can to lift those tariffs, but we’re not at the point of saying that we wouldn’t sign if it wasn’t lifted, although we’re trying to make that case.”

While businesses wait for Congress and Parliament to act on the USMCA, analysts from PricewaterhouseCoopers have several suggestions for how manufacturers can adapt so they are ready should the agreement take effect next year. They suggest:

  • Modeling scenarios around USMCA as well as other trade policies, both existing and prospective (e.g., tax structures, logistics, capacity constraints, etc.);
  • Prioritizing actions over a multi-year timeline based on risk-mitigation scenarios (e.g., supply chain changes country of origin shifts, transfer pricing, customer pricing);
  • Building in mechanisms and strategies to ensure long-term supply chain flexibility and agility;
  • Assessing potential strategic mergers and acquisitions that align with USMCA and other trade policy shifts;
  • Forming a Program Office to manage the cross-functional impact of USMCA and other trade policy shifts; and
  • Building more rigorous processes around cataloguing the origin of all imported content and accurately assigning value to that content.

Click here to read PwC’s analysis of what the USMCA means for industrials.

Also last week: according to American Metal Market (AMM, subscription required), an official from the U.S. Commerce Department said U.S. trade officials will shift their focus to Chinese trade matters now that negotiations on the USMCA are finished.