The new trade agreement struck Sunday night between the U.S. and Canada eases uncertainty in the U.S. auto industry about the Trump administration’s trade policy, helping car manufacturers to move forward on factory investments with greater clarity.
The tentative pact, which still must be approved by Congress, spares auto makers from costly tariffs on cars imported from Canada and Mexico, a major relief for an industry that has for more than two decades relied on duty-free trade to expand operations in North America.
But the new rules could also force car companies and their parts makers to alter their supply chains, The Wall Street Journal reports, potentially increasing costs at time when profits are already under pressure from slowing new-car sales in the U.S., industry officials and consultants say.
The late Sunday night deal reached with Canada moves President Donald Trump a step closer to cementing a new trade deal for the continental bloc that will replace the North American Free Trade Agreement established more than two decades ago.
The new tri-country pact—officially to be called the U.S.-Mexico-Canada Agreement, or USMCA—overhauls the rules for auto trade in the region, requiring automakers to build a greater portion of a car in North America and with higher-wage workers to avoid duties when crossing borders in the region.
