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New USMCA Impact on Container Trade

There are some potential lessons to be learned for container trades from the new US Mexico Canada Agreement (USMCA.) This is the replacement for the North American Free Trade Agreement (NAFTA) that has governed North American trade between Canada, Mexico and the United States since 1994. The new North American trade deal was agreed to by the three countries at the end of September. This was the result of last-minute concessions made over the course of just a few days on the part of the United States and Canada who had been at an impasse as recently as the week before.

The deadline was somewhat artificial coming from the threat from the US to proceed with the US Mexico Trade Agreement negotiated this summer and withdrawing from NAFTA leaving Canada out. The timing was from the end of Mexican President Nieto’s term under whom the countries wanted to complete a deal. The speed with which this was completed indicates the US can move fast on other deals, at least when a deadline can be agreed to pressure compromise.

For container trades the impacts of this deal are indirect, mostly from North American supply chains not being disrupted as they could have been. There are higher ‘North American Content’ rules in USMCA for the auto industry, which will pressure automakers to transplant more auto parts sourcing to North America, mostly substituting for Asian parts today. That would reduce inbound container volumes for all three countries, but not rapidly, as the agreement won’t likely even be finally approved until 2019.

More importantly, the concessions made by the US could signal that US positions in trade disputes with other countries, even China, may be partially posturing for negotiations. The US agreed to a deal that didn’t include some significant changes the US had been insisting on, such as removing NAFTA’s dispute settlement process and a five-year sunset clause. It didn’t resolve every issue, but the quick progress raises expectations that the current commodity tariff threats hanging over US container trade volumes could dissipate quickly if negotiations can be advanced under deadline pressure.

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