It has been a big week for International trade in Washington. The U.S. and China signed phase one of a trade deal and the Senate passed the U.S.-Canada-Mexico trade agreement (“USMCA”). Seemingly great news, but what does it actually mean for the economy and business owners?
First, the U.S. and China trade deal: With this deal China has committed to purchasing $200 billion in U.S. goods and services over the next two years and has pledged to open up its markets to U.S. firms and implement penalties for domestic companies engaging in Intellectual Property theft. For China’s commitment, the U.S. has agreed to lower duties to 7.5% on $120 billion in goods while keeping existing Tariffs on $250 billion of other goods. The deal is seemingly a lopsided win for the U.S., and after 18 months of a trade war we are hopeful that the manufacturing industry will increase hiring now that near-term tensions have subsided.
Second, the USMCA: The Senate overwhelmingly approved the trade agreement in an 89-10 vote. The USMCA replaces the 25-year old North American Free Trade Agreement (“NAFTA”) which is criticized for allowing U.S. companies to move their manufacturing facilities to Mexico and exploit low-wage Mexican laborers. The USMCA aims to bring automotive and various other manufacturing back to the U.S. by creating wage parity between the two countries. The main pillar of the deal requires Mexico to allow its laborers to form independent unions, which should improve working conditions and raise wages. Should the agreement be adhered to, it is estimated that it would boost the U.S. economy by $68 billion dollars and add 176,000 jobs in the coming years.
While there is still a lot to digest between the two pieces of legislation, the potential benefits to U.S. workers are vast. If you have clients looking to hire American, we can help.A Big Week in Washington