Canada and Mexico's big trade win

Like all good friends, Canada, the US, and Mexico sometimes get into squabbles. Luckily, they have a panel of unbiased trade experts on-hand to help resolve them.

What happened: Canada and Mexico scored a big trade victory after an international dispute panel ruled in their favour concerning complaints that the US had breached the Canada-United States-Mexico Agreement (CUSMA, aka, the new NAFTA). 

Catch-up: Under CUSMA, the countries can avoid vehicle import taxes if 75% of their components are North America-made. The argument was over how to calculate that 75%. For instance, Canada argued if 75% of a core part (like an engine) is North American, then the entire part should round up to 100% North American-made within the total calculation.

  • …stay with us here. The US favoured a more detailed calculation that didn’t allow for rounding up. Mexico and Canada filed trade complaints, basically, on the grounds they were sneaky changes that would hurt auto production.

  • Ultimately, the panel ruled in Canada and Mexico’s favour after Canada submitted an e-mail from a US official that proved the countries all originally agreed to the simpler formula that included an allowance for rounding up. 

Why it matters: As the three countries vow to work together and create more reliable supply chains close to home (amidst international uncertainty), the panel’s ruling is a positive sign the US won’t be able to simply boss around its neighbours on crucial trade issues.