The Economic Impacts of the United States-Mexico-Canada Agreement

By Rylee Cheney

The United States-Mexico-Canada Agreement (USMCA) is projected to spur over sixty-eight billion dollars in new economic activity. In 2021, a record seventy-five percent of Canadian and Mexican imports originated from the United States, making the countries America’s first and second largest export markets respectively [2]. The USMCA was announced in 2018 to replace the previous North American Free Trade Agreement (NAFTA) which had been in effect since 1994. It was passed in Congress by a bipartisan majority and entered into force on July 1st, 2020 [3].

Since implementation, the USMCA has proven effective and has had positive economic impacts. The collective market comprises over five hundred million consumers across the three nations [4]. Most significantly, the agreement establishes a framework for the countries to collaborate on trade policies aimed at supporting economic growth, workers, and local communities.

The USMCA increases U.S. access to Canadian markets for agricultural products such as dairy and poultry by up to 3.6 percent, through the reduction of trade barriers [5]. Additionally, the deal prohibits new taxes on digital products and services such as music, e-books, and data flows, while also standardizing copyright protections for internet companies [5]. These provisions promote more open trade between the countries, benefitting both consumers and businesses.

The USMCA has also generated numerous employment opportunities across North America. In 2021 alone, over 2.4 million U.S. jobs depended on exports to Canada and Mexico, while over 7 million jobs in Canada and Mexico relied on trade flows to their continental partners [6]. Increased hiring provides greater tax revenue to fund public services and infrastructure investments, improving social outcomes. Moreover, higher employment leads to expanded consumer spending which further aids economic growth. The deal has been especially beneficial for small and medium-sized enterprises looking to tap into cross-border trade [7].

By removing barriers and facilitating commerce, the USMCA has enabled access to more plentiful, affordable goods and services for citizens in all three countries. Total merchandise trade between the U.S. and its North American partners grew to over $1 trillion in 2021 [6]. U.S. exports to Canada and Mexico have tripled since 1993 and increased more than exports to any other country since the 2007 recession, generating substantial gains for American companies [7].

The USCMA helps guide North American economies toward an integrated, prosperous future while updating outdated NAFTA provisions. The agreement warrants ongoing support given its considerable proven advantages. Interested parties can promote the USMCA’s success through self-education, policy advocacy with elected officials, and conscious consumer choices that preference North American suppliers.

Works Cited