From The Editor

Whatever You Call It, New NAFTA Welcome

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Through his first 18 months in office, Donald Trump has delivered on most of his promises to the industrial economy. 

His early push toward deregulation had wide support in the business community, and likely created a boost in conditions. A similar response greeted the 2017 Tax Cuts and Jobs Act the president signed. 

The Trump administration has paid particularly close attention to the metals industry. His push for projects such as the expansion of the Keystone XL Pipeline were welcomed by the energy sector and its suppliers. 

Of course, no actions were more metals-centric than the Section 232 tariffs he imposed earlier this year, with its 25 percent tax on steel products and 10 percent fee for imported aluminum. While those tariffs do not enjoy universal support from the supply chain, with more opposition to the moves the further removed from the production process a company finds itself, mills and distributors have undoubtedly enjoyed the high-price environment of 2018. 

The one area where Trump and the metals industry were not on the same page has been NAFTA, which the president repeatedly has blasted, while producers and distributors have typically credited it for strong domestic growth. 

In late August, the president announced an agreement had been reached with Mexico on a bilateral trade deal that would replace NAFTA. The early details of the new pact don’t indicate a wholesale overhaul of the old agreement, with the rules of origin on auto content (up to 75 percent from 62.2 percent) the most notable change. Some additional language on intellectual property and concessions on Mexican labor issues were also included. On the surface, it looks like the kind of minor upgrade that most of the metals industry was hoping for.

Cementing such a pact, however, will require passage over two potentially stormy Cs – Congress and Canada. The House and Senate must sign off on a new pact, since the U.S.-Mexico pact is not a true restructuring of NAFTA. And given both the infighting inherent in Congress, plus the potential for a flipped House in November, nothing is certain in D.C. 

Also, without Canadian inclusion, the deal may be more symbolic than relevant to clearing the way for continued growth of the interconnected supply chain. A deal that excludes the United States’ largest trading partner is not good for either country. Or for Mexico, for that matter. 

As we went to press, there were some signs that Canada was willing to get to the bargaining table to hammer out a final agreement that satisfies each of the country’s most pressing desires. Here’s hoping that by the time you read this, the U.S.-Mexico Trade Deal has been scuttled in favor of NAFTA Version 2.0, whatever name might be attached to it. 

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