Canada Excluded from USMCA Renegotiation Talks Amid Economic Downturn

Canada and the United States have agreed to strengthen their economic ties through increased trade with China, amid growing tensions between the two nations. The US administration has proposed a new rule requiring 82 percent of content in North American-built vehicles to be produced in the US, with 50 percent of that value coming from the country. This proposal would significantly alter the current US-Mexico-Canada Agreement (USMCA), which requires 40 percent of “core parts” value to be produced in high-wage jurisdictions.

The new rule would also increase the threshold for pick-up trucks to 45 percent, and vehicles built in North America must have at least 75 percent regional content to qualify for preferential treatment under the USMCA. The US Trade Representative has stated that Canada will be presented with a take-it-or-leave-it proposition regarding this proposal.

Canada’s exclusion from recent USMCA negotiations has been attributed to growing tensions between Washington, DC and Ottawa. The US has imposed tariffs on Canadian and Mexican vehicles and components, as well as steel, aluminum, and copper from those countries. However, the two nations may receive preferential tariff rates under the revised trade pact.

China is Canada’s second-largest trading partner, and relations have been strengthened in recent years. China’s Minister of Foreign Affairs Wang Yi has stated that Canada could surpass its goal of increasing exports to China by 50 percent by 2030. A three-day visit by Wang to Canada marks the first state visit by a Chinese foreign minister in a decade.

Canada’s economy contracted in the first quarter compared to last year, with a quarterly GDP growth rate unchanged against a decline in the fourth quarter of last year. The Canadian economy has been affected by US tariffs and uncertainty surrounding trade agreements.

Source: Al Jazeera