This week President Trump announced a new trade agreement with Canada and Mexico intended to replace the North American Free Trade Agreement (NAFTA). U.S. and Canadian negotiators worked around the clock this past weekend to secure an agreement just before the Sunday midnight deadline. NAFTA will now be replaced with the U.S.-Mexico-Canada Agreement (USMCA), covering a region that trades more than $1 trillion annually.

In a victory for the RV industry, motorhomes and travel trailers were not included in the new pact’s rules of origin for motor vehicles. Under these new rules of origin, automobiles and light trucks--but not RVs--will have to have 75 percent North American content to be eligible for duty-free treatment under the new agreement, along with 40 percent of all parts needing to be made by workers making at least $16 per hour.

Motorhomes will remain at 62.5 percent domestic content for duty-free treatment, the same as under current NAFTA rules. Travel trailers will need to be at 50 percent domestic content, again the same as treatment under NAFTA presently. Per NAFTA and the new agreement, domestic content means content produced in any of the three signatory countries. 

The new agreement also includes language which ensures that Canada and Mexico will be exempted from any future U.S. tariffs on imported automobiles and parts, such as that being contemplated by the Administration under the Section 232 national security provisions. This would only be revisited if there was an abnormally large surge of imports from the two countries.

USMCA must still be signed by the leaders of all three countries by the end of November. Congress would then need to approve the trade pact as well to implement the new provisions. If approved by Congress, most likely next year, the new treaty would take effect in 2020. Trade between the three countries will be governed by NAFTA until the new agreement takes over.