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USMCA, a major Trump policy win, quietly begins July 1 as virus, economy, unrest dominate headlines

The White House has long touted the deal as a superior replacement for NAFTA

Updated: July 1, 2020 - 5:26pm

The Trump administration's USMCA deal goes into effect Wednesday – marking a quiet start for a major policy victory for the president that in recents months has been overshadowed by the recent social-justice protests and the months-long coronavirus pandemic that has slowed the U.S. economy.

The trade deal, officially titled the United States-Mexico-Canada Agreement, is President Trump's response to the decades' old deal among the three countries that he campaigned in 2016 on replacing. 

The deal is a result of more than two years of negotiation between the respective leaders of the countries. The new deal will affect more than $1 trillion a year in trade between among them. 

Canada and Mexico are the two countries that receive the most U.S. exports annually. The United States imports more from its two continental neighbors than anywhere aside from China. 

Trump complained during his 2016 campaign that the U.S. was getting financially clobbered under the Clinton-era agreement. 

He called NAFTA during the campaign "the worst trade deal" in the history of the country. 

Specifics of the deal, which the administration boasts will create hundreds of thousands of new American jobs, include rules that increase the difficulty of moving cars and car parts across national borders duty-free. The new deal stipulates that 75% of a vehicle's component parts need to be produced in North America to avoid tariffs, and 40% need to be manufactured by workers earning at least $16 an hour. 

"When I ran for president, I made a solemn promise to the American people that I would end the job-killing failure called the North American Free Trade Agreement and replace it with a better deal for our workers, farmers, ranchers, and businesses," Trump said Wednesday in an official White House statement. "Today, with NAFTA ending forever and the United States-Mexico-Canada Agreement entering into full force, our grateful Nation pays tribute to America’s workers and celebrates their ability to overcome decades of bad deals and failed policies."

The USMCA also accounts for areas of trade that were not nearly as well developed in 1994, when NAFTA went into effect. The USMCA bans the creation of "data-localization requirements," which would limit the amount of traffic that can move from a data center in one country to servers in other nations. The deal additionally nixes tariffs being placed on data transfers. 

The International Trade Commission estimates that the deal will boost U.S. gross domestic product by roughly $70 billion, and increase exports to Canada and Mexico by 5% and 7%, respectively. 

Unlike NAFTA, the USMCA has a built in sunset clause that causes the deal to expire after 16 years. Trump adviser and son-in-law Jared Kushner says that the built in expiration of the deal not meant to create trade uncertainty, "but to ensure that the agreement will continue to serve America's interests over the long run."

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