The future of trade in North America was decided on September 30 and over the week, news kept pouring on what the deal could bring to the automotive industry. USMCA still needs to be signed by President Enrique Peña Nieto and his counterparts in the US and Canada to later be ratified by each country. Nothing is set in stone yet but overall, there seem to be optimistic views on a post-NAFTA era.
For the automotive industry, guidelines on rules of origin changed and became much stricter. Most companies will have until 2023 to comply with the new standards but the latest newcomers will be given until 2025 to reach the new goals.
For more on what happened over the week, keep straight ahead!
A Brave New Deal
Concessions were made on all sides of the negotiation table and USMCA became a reality on Sunday, September 30. Peña Nieto, Trump, and Canada’s Prime Minister Justin Trudeau delivered statements on what the treaty would bring to their countries and to the North American block.
For analysts, the new agreement brought certainty to the region and a more positive expectations regarding economic growth in Mexico. According to James Salazar, Deputy Director of Economic Analysis at CIBanco, thanks to USMCA Banxico could maintain the TIIE at 7.75 percent.
Achieving an understanding on USMCA, however, closed the door for any of the three countries to establish a trade agreement with China, lest they want to forfeit their position in USMCA.
Mexico’s Future in USMCA
According to Juan Pablo Castañón, President of the Coordinating Corporate Council, Mexican exports could grow by 50 percent thanks to USMCA due to the potential in industries such as automotive, energy, technology, aerospace, manufacturing and farming.
The new rules of origin will also open the doors for new investment projects focused on engineering and innovation, says Eduardo Solís, Executive President of AMIA. Similarly, Óscar Albin, Executive President of INA, says the treaty will create more opportunities for further investment in the auto parts sector.
Though the rules of origin will start to change as soon as the agreement is enforced, the latest entrants to the region will have until 2025 to comply with the new regional content standards. The rest of the industry will have to comply by 2023 at the latest, according to Solís.
In a previous agreement with the US, Mexico had already established an insurance should the US implement 25 percent tariffs on light vehicle imports. The same insurance will apply under USMCA but now both Mexico and Canada will have a limit of 2.6 million light vehicle exports in this scenario.
Tesla on Thin Ice
Tesla and Elon Musk will each pay US$20 million to the US Securities and Exchange Commission (SEC) after Musk’s misleading tweets referring to Tesla’s possible exit from the stock market. The company lost US$45.2 billion since August 2018.
After settling the agreement, which also included Musk stepping down as Chairman of the company while remaining Executive President, Tesla’s stock rose 16 percent on Monday.
On Thursday, however, the stock plummeted 4.4 percent once more after Musk attacked SEC calling it the Shortseller Enrichment Commission. “… the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!” he tweeted.