USMCA impact on US economy to be moderate, ITC says
The United States-Mexico-Canada agreement (USMCA) will likely have a moderate impact on the US economy and potentially increase automotive parts production and employment in the sector, the US International Trade Commission (ITC) said in an economic analysis report issued on Thursday April 18.
The USMCA – the proposed replacement to the North American Free Trade Agreement (Nafta) – would raise US real gross domestic product by an estimated 0.35% ($68.2 billion) and US employment by 0.12% (176,000 jobs), the ITC said in the report.
A key component of the USMCA targets automotive rules of origin, requiring vehicles to satisfy a 75% regional value content requirement, up from the 62.5% for duty-free treatment under Nafta, according to a fact sheet from the Office of the US Trade Representative (USTR).
The USTR has also previously said that vehicles also would only be considered as originating from North America if at least 70% of automakers’ steel and aluminium purchases in the previous year were sourced from the region.
“USMCA’s requirements are estimated to increase US production of automotive parts and employment in the sector, but also to lead to a small increase in the prices and small decrease in the consumption of vehicles in the United States,” the ITC report said.
The new trilateral trade agreement would likely lead to a net increase of 28,000 jobs in the automotive parts and manufacturing sector, the agency said, lower than the estimated increase of 76,000 jobs predicted by US government officials familiar with the USMCA negotiations and who have access to data from vehicle manufacturers.
Additionally, the agreement is seen having a positive impact on all broad industry sectors within the US economy, with manufacturing experiencing the largest percentage gains in output, exports, wages and employment. In absolute terms, services would experience the largest increase in production and employment, the agency said.
The manufacturing and mining sector would likely to see an increase of 49,700 jobs relative to baseline estimates in 2017, the report said, while employment in the services sector would rise by an estimated 124,300 jobs.
Trade-wise, the USMCA is expected to have a positive impact on US trade, both with regional partners and globally.
US exports to Canada and Mexico would increase by $19.1 billion (5.9%) and $14.2 billion (6.7%) respectively. US imports from Canada would also increase by $19.1 billion (4.8%) and those from Mexico by $12.4 billion (3.8%), the ITC said.
Fastmarkets AMM’s daily Midwest HRC index stood at $684.40 per short ton ($34.22 per hundredweight) on Wednesday, almost unchanged from $34.19 per cwt the previous day but down by 0.1% from $34.27 per cwt on April 10.