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Canada and U.S. Reach Agreement on Trade Deal

Canada and U.S. Reach Agreement on Trade Deal

Canada has reached a tentative trade deal with the United States and Mexico.


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The new deal, to be known as United States-Mexico-Canada Agreement (USMCA), is reported to take effect in late 2019 or 2020. The agreement follows extensive negotiations to revise the North American Free Trade Agreement (NAFTA).

The new USMCA provides some clarity on contentious trade issues, particularly for the dairy and automotive industries. Specifically, the agreement allows U.S. dairy producers additional access to Canada's market while limiting the effects of Canada's existing supply management system. The USMCA also exempts Canadian-made autos and auto parts under a specific quota from U.S. tariffs, among other consequential changes.

The 25% tariff on steel, and 10% tariff on aluminum and other specified products that were recently introduced by Canada and the United States will remain in place. However, the parties are continuing to discuss this matter separately.

Now that Canada has agreed to sign onto the USMCA, it will have to receive approval from Canada's Parliament as part of the ratification process. However, since the text of the USMCA is not expected to change, Canadian businesses should start to carefully determine the effect of the new agreement and make adjustments in advance of the effective date.

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