6 Ways Trump Changed NAFTA (2023)

On Jan. 29, 2020, President Donald Trump signed the United States-Mexico-Canada Agreement (USMCA). The White House estimated it would create 600,000 jobs and add $235 billion to the economy.

The deal was an important component of President Trump's economic plan. He wanted to lower the trade deficit between the United States and Mexico. In 2019, Americans bought nearly $100 million more imports from Mexico than vice versa. The trade deficit with Canada was smaller in 2019 at just under $26 million.

The new agreement was a renegotiation of the North American Free Trade Agreement (NAFTA). NAFTA aimed to make North America more competitive in the global marketplace. NAFTA was the world's largest free trade agreement when it was implemented.

Key Takeaways

  • Representatives from Canada, Mexico, and the U.S. signed the USCMA in November 2018.
  • By the end of 2020, all three countries had ratified the deal.
  • The USMCA made major updates to six areas of the original NAFTA deal: auto manufacturing, dairy, truck standards, intellectual property, pharmaceuticals, and dispute resolution.

How the USMCA Came Into Force

Final negotiations for the USMCA wrapped up on Sept. 30, 2018, meeting President Trump's Sept. 30 deadline. He needed to notify Congress 90 days before signing the deal. He wanted that to happen before the new Mexican president, Andres Manuel Lopez Obrador, assumed office on Dec. 1, 2018.

The USMCA was signed on Nov. 30, 2018, by U.S., Mexican, and Canadian leaders at that year's G-20 meeting.

It was then sent to each country's legislature to be ratified. After signing the agreement, Trump threatened to terminate NAFTA if Congress didn't approve the USMCA.

House Democrats approved the deal in December 2019. Some Senate Republicans wanted steel and aluminum tariffs eliminated for Canada and Mexico, so President Trump lifted them. On Jan. 16, 2020, it was passed by the Senate. With bipartisan support, Donald Trump signed the USMCA on Jan. 29, 2020.

For the USMCA to come into force, all three countries needed to finish ratifying it. Mexico was the first to ratify the agreement in June 2019. Canada ratified it on March 13, 2020.

The parties agreed to revisit the USMCA after six years. If they don't renew it, the deal will sunset in 16 years.

(Video) Trump: NAFTA was worst trade deal ever made

6 Changes to NAFTA Under the USMCA

The new deal changes NAFTA in six areas: auto manufacturing, dairy, truck standards, intellectual property, pharmaceuticals, and dispute resolution.

Auto Manufacturing

The USMCA requires auto companies to manufacture at least 75% of the car's components in Canada, Mexico, or the United States. It was 62.5% previously. At least 40% of the value of a passenger car and 45% of a light truck must be made by workers earning an average of $16 an hour. Autos that don't meet these requirements will be subject to tariffs. The agreement protects Mexico and Canada from any future U.S. auto tariffs.

These changes should create more jobs for U.S. autoworkers, but the changes could also reduce the number of U.S. jobs manufacturing automobile exports to China. Higher U.S. labor costs will make cars too expensive for the Chinese market. Car prices will increase in America, as well. Some small vehicles will no longer be sold in North America.

Canadian Dairy Market

Canada must open up its dairy market to U.S. farmers and eliminate its complex pricing scheme for Class 6 and Class 7 products. These changes affect products like milk protein concentrate, skim milk powder, and infant formula. The changes also allow certain U.S. cheeses to be marketed more in Canada, and they open the grocery story wine market in British Columbia to American wine.

Mexican Trucks

The USMCA requires Mexican trucks to meet U.S. safety standards before crossing the border. That was a win for Mexico. Mexico was promised this provision in the first NAFTA agreement, but it was withdrawn by the U.S. Congress. Mexico must also allow its workers to form unions.

Patents and Trademarks

Fourth, the new agreement provides more protection for patents and trademarks. This agreement reflects many of the intellectual property rights negotiated in the Trans-Pacific Partnership abandoned by Trump.

Dispute Resolution

Companies can no longer use Chapter 19 of NAFTA to resolve disputes with governments. U.S. oil companies are among the few with exemptions from this rule. Oil companies are concerned Mexico may try to nationalize its oil industry again.

NAFTA's Chapter 11 dispute resolution panels remain. These arbitration panels rule on whether a NAFTA country treated a partner's overseas investments unfairly. The panels make sure U.S. corporations maintain the rights protected by the U.S. Constitution.

History of NAFTA Renegotiations

The NAFTA renegotiations began on Aug. 16, 2017.President Trumpappointed U.S. Trade Representative Robert Lighthizer to represent the United States.


In his first 100 days, Trump threatened to withdraw from NAFTA if Canada and Mexico refused to renegotiate.

(Video) Donald Trump: NAFTA Is Worst Trade Deal Ever Signed | CNBC

Both Canada and Mexico were willing to renegotiate because NAFTA was outdated. For example, NAFTA didn't address internet commerce. The two countries also wanted NAFTA to incorporate theenvironmental and labor protections that are in side agreements.

On March 5, 2018, the seventh round of therenegotiations concluded. Progress had been slow.

On May 31, 2018,Trump imposed a 25% tariff on steel from Canada, Mexico,and the European Union.In retaliation, Canada imposed tariffs on $12.6 billion of U.S. imports. Negotiators tried to move forward despite the angry rhetoric from their nations' leaders.

Changes Trump Wanted But Didn't Get

The Trump administration claimed the dispute resolution panel eroded the sovereignty of U.S courts. For example, in 2017, the U.S. Commerce Department accused western Canadian provinces of subsidizing their lumber exports. The Commerce Department claimed provincesdumpedlow-cost lumber into the American market. The resolution panel ruled in favor of Canadian provinces. The Commerce Department threatened to impose a 20% tariff on Canadian lumber imports, but U.S. manufacturers wanted to keep the panel to protect their foreign investments.

The administration wanted its neighboring trade partners to open up more of their government contracts to U.S.companies. At the same time, it wanted to use “Buy American” provisions to limit the ability of foreign firms to win U.S. governmentcontracts.

The administration also wanted toeliminate unfair subsidies. It wanted state-owned companies, such as Mexico's Pemex, tooperate more like private corporations. In 2013,Mexican PresidentEnrique Peña Nietoallowed foreign direct investment in oil company Pemex. However, as a source of national pride, the company is unlikely to be completely privatized.

Trump wanted Mexico to end itsvalue-added taxon U.S. companies because this effectively taxes U.S. exports.Mexico charges a 16%VAT tax on all business sales, whether the sales are to other firms or consumers. When companies export the finished product to the United States, Mexico rebates the VAT tax. U.S. companies that export to Mexico must pay the VAT tax. This may encourage U.S. companies to build factories in Mexico to receive the rebate and avoid the tax.


A value-added tax (VAT) is like a federal sales tax that's imposed on all companies in the supply chain.

Trump asked Mexico to endthe maquiladora program. The program allowsU.S. companies to set up low-cost factories across the border in Mexico to assemble finished products. The companies then export the goods back to the United States.

Maquiladoras became responsible for partof Mexico's exports, and they employed a percentage percent of itsworkforce. They also undercut American workers by sending jobs to Mexico. NAFTA expanded the maquiladora program by ending tariffs.

(Video) Watch President Trump's full remarks on new NAFTA agreement, USMCA

What Mexico and Canada Wanted and Didn't Get

Mexico and Canada both wanted increased access for business travelers. They also wanted the inclusion of gender rights in the agreement.

Canada did not get the United States to end tariffs on its lumber and dairy products. It also wanted Boeing to drop its lawsuit against Bombardier.The U.S. Commerce Department added a tariff of about 220%on the imports of Bombardier C Series jets. As a result, Airbus will fund Bombardier's manufacturing plant in Alabama to skirt the tariff. That move worsens Boeing's competitive position against Airbus, its biggest competitor.

Mexico wanted an anti-corruption clause.

How Trump Could Have Easily Ended NAFTA

Trump could have ended NAFTA by submitting a notice under Article 2205 of the NAFTA agreement. He would have to do so six months before withdrawal. He did not need congressional approval to do this.

Some experts refer toSection 125 of the Trade Act of 1974. It states that the president has the power to unilaterally withdraw from all trade agreements. Other experts refer to NAFTA's Implementation Act and argue that, because Congress approved NAFTA, only Congress has the authority to withdraw. The situation is uncharted legal territory.


Even if the United States did withdraw from NAFTA, the other two parties could retain the agreement with each other.

The absence of a trade agreement would reinstate tariffs ontrade between the United States and Canadaand the United States and Mexico. That would raise the costs of imports from Mexico.

Without NAFTA, Mexico and Canada would probably return tomost-favored-nation trade statuses.Canada and the United States would probably reinstate theirbilateral trade agreement. Exports from those countries would be assessed with standard tariffs. At that point, importers probably would sue the U.S. government for making their costs higher overnight.

How the USMCA Affects the Economy

Trump's threat to end NAFTA weakened trade relationships with America's partners. Mexico created a backup plan in case Trump made good on his threat to pull out of NAFTA. Mexico turned toward the Pacific Alliance. In 2011, the alliance created a free trade zone between Mexico, Colombia, Chile, and Peru.

Mexico also improved its trade relationship with the European Union (EU).On April 21, 2018, theEU upgraded its trade agreementwith Mexico. Two years later, the countries agreed to final technical details. Once signed, the new trade agreement will remove tariffs from almost all trade between the twoareas.

(Video) Key differences between the new USMCA trade deal and NAFTA

USMCA might help restore some of the 700,000 manufacturing jobs lost in California, New York, Michigan, Texas, and other states. On the other hand, it could raise the price of affected imports for American consumers. Inflation would result.


The new restrictions might reduce some trade.

In 2019, the United States imported $358 billion from Mexico. Mexico is the largest supplier of goods to the United States after China. The new agreement won't threaten the flow and price of these imports, including oil, manufactured products, fruits, vegetables, coffee, and cotton.Automobile imports, on the other hand, are affected.

Similarly, 80%of Mexico's exports go to the United States. Restrictions on auto exports might damage Mexico's economy. This might result in Mexicans immigrating to the United States.

Trump's Policies In-Depth:Tax Plan|Immigration|Health Care|Jobs|National Debt

Frequently Asked Questions (FAQs)

What is a USMCA certificate?

The USCMA altered requirements for certificates of origin. Companies are no longer required to complete certificates (CBP Form 434) for exports. Instead, companies are only required to provide nine pieces of information about the goods, including basic information about the exporter, producer, and importer. Companies can produce this information in any format they choose; there isn't a set template to follow.

Who are the 10 Senators that voted against USMCA?

Senators Cory Booker (D-NJ), Kirsten Gillibrand (D-NY), Kamala Harris (D-CA), Ed Markey (D-MA), Jack Reed (D-RI), Bernie Sanders (I-VT), Brian Schatz (D-HI), Chuck Schumer (D-NY), Pat Toomey (R-PA), and Sheldon Whitehouse (D-RI) voted against the USMCA. Sen. Jim Inhofe (R-OK) did not vote.


How has NAFTA improved? ›

Key Takeaways. Some of the positive effects of NAFTA were increased trade, economic output, foreign investment, and better consumer prices. U.S. jobs were lost when domestic manufacturers relocated to lower-waged Mexico, which also suppressed wages in U.S. manufacturing plants.

What are the 7 purposes of NAFTA? ›

The Purpose of NAFTA

Eliminate barriers to trade and facilitate the cross-border movement of goods and services. Promote conditions of fair competition. Increase investment opportunities. Provide protection and enforcement of intellectual property rights.

What were the two biggest pros good things of NAFTA for the US? ›

The Pros and Cons of NAFTA
  • NAFTA and Its Replacement. ...
  • Pro 1: NAFTA lowered the price of many goods. ...
  • Pro 2: NAFTA was good for GDP. ...
  • Pro 3: NAFTA was good for diplomatic relations. ...
  • Pro 4: NAFTA increased exports and created regional production blocs. ...
  • Con 1: NAFTA led to the loss of U.S. manufacturing jobs.
Sep 9, 2022

Was NAFTA successful Why or why not? ›

By easing trade between 450 million people in three countries, NAFTA more than quadrupled trade in 20 years. This boosted economic growth in all three countries. It also led to lower prices on groceries and oil in the United States.

Who did NAFTA benefit the most? ›

The goal of NAFTA was to promote closer trade relationships, eliminate trade barriers, and increase market opportunities among all three countries in the agreement. However, the United States has indeed benefited the most from NAFTA…show more content…

What are some pros of NAFTA? ›

What are the benefits of the NAFTA for U.S. consumers?
  • more free trade resulting in greater choices in goods and services.
  • lower prices and improved quality products.
  • stronger health and safety standards.
  • improved economic stability in the U.S. marketplace.

How did NAFTA benefit the U.S. economy? ›

In many ways, NAFTA led to lower prices the benefited consumers. Due to tariff-free imports from Mexico, the price of groceries in the United States dropped. In addition, imported oil from both Canada and Mexico reduced the price of gasoline. In addition to prices, certain sectors received employment boosts.

What are the achievements of NAFTA? ›

Within six years of the implementation of the free trade agreement, the trade between the three countries had increased from $109 billion (1994) to $622 billion by 2000. NAFTA also had a significant impact on the three economies in terms of rapid growth in job opportunities and foreign direct investments.

What are 3 facts about NAFTA? ›

1-North America is the most extensive free trade zone in the world: close to five times the size of the European Union. 2-NAFTA allows free trade among more than 480 million residents. 3-The NAFTA region produces goods & services valued at more than $20 trillion every year.

What is NAFTA short summary? ›

North American Free Trade Agreement (NAFTA) established a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. NAFTA immediately lifted tariffs on the majority of goods produced by the signatory nations.

What is NAFTA short answer? ›

The North American Free Trade Agreement (NAFTA), which was enacted in 1994 and created a free trade zone for Mexico, Canada, and the United States, is the most important feature in the U.S.-Mexico bilateral commercial relationship.

How did NAFTA have a positive effect on Mexico? ›

Following the NAFTA agreement, preferential trading with Mexico made it profitable for U.S. and multinational companies to manufacture goods in America, as these could then be exported throughout North America without tariffs. This allowed Mexico to diversify its export economy and shift away from oil significantly.

What are 3 pros of NAFTA? ›

6 Benefits of NAFTA
  • Quadrupled Trade.
  • Lowered Prices.
  • Increased Economic Growth.
  • Created Jobs.
  • Increased Foreign Direct Investment.
  • Reduced Government Spending.
Dec 26, 2020

Which 3 countries benefited from the policies created by NAFTA? ›

NAFTA's purpose was to encourage economic activity among North America's three major economic powers: Canada, the U. S., and Mexico. Proponents of the agreement believed that it would benefit the three nations involved by promoting freer trade and lower tariffs among Canada, Mexico, and the United States.

What were the failures of NAFTA? ›

Due to NAFTA, Mexico lost nearly 1.3 million farm jobs from 1994 to 2004. 5 The 2002 Farm Bill subsidized U.S. agribusiness by as much as 40% of net farm income. 6 When NAFTA removed trade tariffs, companies exported corn and other grains to Mexico below cost. Rural Mexican farmers could not compete.

Why did the NAFTA fail? ›

The 1994 North American Free Trade Agreement (NAFTA) was the first trade treaty that attempted to promote and protect workplace health and safety through a "labor side agreement." NAFTA failed to protect workers' health and safety due to the weaknesses of the side agreement's text; the political and diplomatic ...

When did NAFTA become effective? ›

The United States commenced bilateral trade negotiations with Canada more than 30 years ago, resulting in the U.S.-Canada Free Trade Agreement, which entered into force on January 1, 1989. In 1991, bilateral talks began with Mexico, which Canada joined. The NAFTA followed, entering into force on January 1, 1994.

What is NAFTA called now? ›

The United States-Mexico-Canada Agreement (USMCA) entered into force on July 1, 2020. The USMCA, which substituted the North America Free Trade Agreement (NAFTA) is a mutually beneficial win for North American workers, farmers, ranchers, and businesses.

Is NAFTA still in effect? ›

NAFTA remained in force until USMCA was implemented. In April 2020, Canada and Mexico notified the U.S. that they were ready to implement the agreement. The USMCA took effect on July 1, 2020, replacing NAFTA.

Did NAFTA benefit the US? ›

NAFTA Benefits for the US

Increased Export: since the implementation of NAFTA, US exports have risen from $142 billion to well over $500 billion. US exports to Mexico and Canada rose 156% during this period, while US exports to the rest of the world grew only 65%.

Did NAFTA create jobs? ›

Specifically within NAFTA's first five years of existence, 709,988 jobs (140,000 annually), were created domestically. The mid to late nineties was a period of strong economic growth in the United States.

How has NAFTA impacted the United States? ›

Some critics argue that NAFTA is to blame for job losses and wage stagnation in the U.S., because competition from Mexican firms has forced many U.S. firms to relocate to Mexico. Between 1993 and 2014, the U.S.-Mexico trade balance swung from a $1.7 billion U.S. surplus to a $54 billion deficit.

What were two ways that NAFTA would affect the United States? ›

Clinton and his collaborators promised that the deal would bring “good-paying American jobs,” a rising trade surplus with Mexico, and a dramatic reduction in illegal immigration. Instead, NAFTA directly cost the United States. a net loss of 700,000 jobs.

What was NAFTA's impact on US workers? ›

Second, NAFTA strengthened the ability of U.S. employers to force workers to accept lower wages and benefits. As soon as NAFTA became law, corporate managers began telling their workers that their companies intended to move to Mexico unless the workers lowered the cost of their labor.

What has been the most significant impact of NAFTA quizlet? ›

The most significant impact of NAFTA may not have been economic, but rather political. The agreement has helped to create the background for increased political stability in Mexico.

What are some examples of NAFTA? ›

NAFTA created specific rules to regulate trade in farm products, automobiles, and clothing, for example. Third, exporters were required to get certificates of origin to waive tariffs. 5 That meant an export had to originate in the United States, Canada, or Mexico.

Did NAFTA help or hurt Mexico? ›

Upon passage, NAFTA did bring benefits to Mexico, such as more private investment, but it failed initially to create the jobs that were promised. NAFTA was passed during a time of recession in Mexico, which contributed to the minimal effect of the Act.

How did NAFTA change Mexico's economy? ›

There was a substantial increase in the volume of Mexican exports entering into the U.S. market duty free as the share of imports from Mexico entering duty free increased from approximately 50 percent in 1993 to more than 85 percent in 2001 (Figure 1c). However, some sensitive sectors were still protected under NAFTA.

How has NAFTA affected Mexico economy? ›

Amid a NAFTA-spurred influx of cheap U.S. corn, the price paid to Mexican farmers for the corn that they grew fell by 66 percent, forcing many to abandon farming. From 1991 to 2007, about 2 million Mexicans engaged in farming and related work lost their livelihoods.

What are the successes of NAFTA? ›

NAFTA's immediate aim was to increase cross-border commerce in North America, and in that respect, it undoubtedly succeeded. By lowering or eliminating tariffs and reducing some non-tariff barriers, such as Mexican local-content requirements, NAFTA spurred a surge in trade and investment.

How did NAFTA make trade easier? ›

NAFTA eliminated most tariffs on products traded between the three countries, with a major focus on liberalizing trade in agriculture, textiles, and automobile manufacturing.

How did NAFTA benefit us? ›

NAFTA Benefits for the US

Increased Export: since the implementation of NAFTA, US exports have risen from $142 billion to well over $500 billion. US exports to Mexico and Canada rose 156% during this period, while US exports to the rest of the world grew only 65%.

How did NAFTA change how Americans eat? ›

How did NAFTA change how Americans eat? We were able to import new foods, like avocados, for Americans to eat.

Did NAFTA improve working conditions? ›

Contrary to what the American promoters of NAFTA promised U.S. workers, the agreement did not result in an increased trade surplus with Mexico, but the reverse. As manufacturing jobs disappeared, workers were downscaled to lower-paying, less-secure services jobs.

How did NAFTA impact the economy? ›

For all that, most studies conclude that NAFTA has had only a modest positive impact on U.S. GDP. For example, according to a 2014 report by the Peterson Institute for International Economics (PIIE), the United States has been $127 billion richer each year thanks to “extra” trade growth fostered by NAFTA.

What are two positive effects of NAFTA? ›

NAFTA boosted trade by eliminating all tariffs among the three countries. It also created agreements on international rights for business investors. That reduced the cost of commerce. It spurs investment and growth, especially for small businesses.

What was NAFTA and what impact did it have? ›

The North American Free Trade Agreement (NAFTA) was implemented in 1994 to encourage trade between the U.S., Mexico, and Canada. NAFTA reduced or eliminated tariffs on imports and exports between the three participating countries, creating a huge free-trade zone.


1. Legalese: What's the difference between USMCA and NAFTA?
(Georgetown Law)
2. Trump Signs USMCA Ending 'Nafta Nightmare'
(Bloomberg Television)
3. Donald Trump's 7-point trade plan: No TPP, renegotiate NAFTA
(CNN Business)
4. How Trump’s tariffs changed the fates of these two factories
(PBS NewsHour)
5. Trump made ‘significant’ improvements to revised NAFTA deal
(Fox Business)
6. USMCA vs NAFTA, explained with a toy car
Top Articles
Latest Posts
Article information

Author: Jamar Nader

Last Updated: 03/29/2023

Views: 6344

Rating: 4.4 / 5 (55 voted)

Reviews: 86% of readers found this page helpful

Author information

Name: Jamar Nader

Birthday: 1995-02-28

Address: Apt. 536 6162 Reichel Greens, Port Zackaryside, CT 22682-9804

Phone: +9958384818317

Job: IT Representative

Hobby: Scrapbooking, Hiking, Hunting, Kite flying, Blacksmithing, Video gaming, Foraging

Introduction: My name is Jamar Nader, I am a fine, shiny, colorful, bright, nice, perfect, curious person who loves writing and wants to share my knowledge and understanding with you.