DETROIT — President Donald Trump touted the signing of the United States-Mexico-Canada Agreement Thursday at the Warren plant of Dana Inc.

“We just ended a nightmare known as NAFTA,” Trump said on stage in front of employees and a few hundred supporters. “They took our jobs for a long time. We now have the United States-Mexico-Canada Agreement. It’s a whole different ballgame. It’s the greatest agreement we’ve ever made.”

Trump signed the long-negotiated agreement Wednesday at a ceremony in Washington.

The visit to the Warren manufacturing plant is the first by a U.S. president since September 1942, when President Franklin D. Roosevelt and first lady Eleanor Roosevelt visited what was formerly the Detroit Arsenal Tank Plant. Trump’s visit to Dana’s operations was his second to Michigan in about six weeks.

“They don’t use those words anymore: Made in the USA,” Trump said.

The Trump administration is hoping the deal will dent imports of vehicles and parts from outside the U.S., including Mexico.

“Michigan lost 200,000 jobs,” Trump said of NAFTA. “Shipped those jobs to Mexico. You lost your car companies.”

Under the new USMCA agreement — which replaced the North American Free Trade Agreement that went into effect in 1994 — is a requirement that 75 percent of a vehicle’s components be made in one of the three North American countries to cross borders tariff free, up from 62.5 percent under NAFTA.

Content requirements

The content requirements were critical to the U.S., believing a higher standard would force more production stateside. Roughly 30 percent of the 2.33 million vehicles imported to the U.S. from Mexico in 2017 didn’t meet the current 62.5 percent content requirement, Mexican Economy Minister Ildefonso Guajardo told Bloomberg TV in 2018. 

Only three vehicles exported to the U.S. — the Nissan Versa, Audi SQ5 and Fiat 500 — were above that 62.5 percent threshold but below the new 75 percent requirement. Those three vehicles sold a combined 141,944 units, or about eight-tenths of a percent, of the 17.05 million total units sold in the U.S. last year, according to sales data.

Under USMCA, Nissan, Audi and Fiat Chrysler will have to either pay the standard 2.5 percent WTO tariff on those models imported to the U.S. or source more parts from the trade pact countries. Theoretically, this could create jobs in the U.S.

The new trade agreement also mandates that at least 40 percent of parts on a vehicle must come from so-called high-wage factories that pay an average of $16 per hour for production workers.

The administration believes this would shift auto production away from Mexico, where the average wage for auto assembly workers is $7.34 per hour and $3.41 per hour for parts supplier workers, compared to $29.08 per hour and $19.84 per hour in the U.S., respectively, according to research by the Center for Automotive Research.

But the final agreement is not indexed to inflation, making the $16 per hour average potentially less of problem in the future, said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. Manufacturers are also allowed, under the trade agreement, to count research and development and information technology workers in the averages, allowing production workers to be paid significantly less as they are offset by higher wage employees.

“There are plenty of ways to get (to meet the requirements) without raising wages in Mexico,” Dziczek said.

It’s also likely cheaper for manufacturers to pay the 2.5 percent WTO-standard tariff on parts and vehicles than shift production to U.S. or Canadian workers who earn as much as $21 more per hour.

Under USMCA, the Congressional Budget Office projects U.S. tax revenue to increase nearly $3 billion between 2020 and 2029 largely due to companies not altering production imports.

Villain to victor

The agreement has been met with wide support from the industry. General Motors and Ford Motor Co., for example, have been staunch supporters.

In a statement in December, GM said it was pleased to see the USMCA agreement move forward.

“We view the agreement as vital to the success of the North American auto industry and have long supported efforts to modernize it in a way that strengthens the industry and positions it to be a global leader,” GM’s statement said.

Ford said in a December statement that the USMCA “allows the U.S. auto industry to be globally competitive, encourages U.S. research and development in this new era of mobility, and provides a framework for good-paying U.S. jobs.”

The Motor and Equipment Manufacturers Association, which represents more than 1,000 automotive suppliers, also has been in favor of USMCA. In a memo earlier this month, the association said it was pleased by the bipartisan effort it saw in the USMCA Senate vote.

“The USMCA will help ensure that motor vehicle suppliers in the U.S. stay competitive in the global marketplace,” MEMA said in a statement. “The USMCA will provide economic certainty and opportunity for manufacturing growth in the United States and throughout the region.”

Dealers support

The National Automobile Dealers Association supported the deal, saying in October that Congress needs to adopt a new trade pact to keep new vehicles within reach of U.S. consumers.

“It’s better than no NAFTA,” Dziczek said. “For the industry, there is resolution around free trade rules in North American and that’s huge. They will welcome this after a few years of everyone wondering what the heck was going on.”

Negotiations between the U.S., Mexico and Canada over the agreement initially began in August 2017.

Still, others have been wary of the agreement, including Democratic presidential hopefuls Sen. Bernie Sanders and businessman Tom Steyer. Both candidates have voiced their opposite to the agreement, as the USMCA does not address ongoing global climate change concerns.

Democrats originally opposed the deal, walking a tightrope between opposing Trump and running afoul of union labor desires, which called for stronger labor provisions to protect U.S. union jobs.

In response to those concerns, the administration and Democrats adjusted the deal to include an independent panel that can investigate factories accused of violating labor rights and stop shipments of that factory’s goods at the border. It establishes an interagency committee to monitor Mexico’s recent labor reforms — which include legal requirements to combat forced labor, violence against workers and allow for the establishment of independent unions.

Democrats have since been positioning USMCA as a win for them as well.

“Although the USMCA is not perfect, it is an improvement from the initial deal announced by the administration and includes strict labor standards and stronger enforcement mechanisms that I pushed for,” U.S. Sen. Gary Peters, D-Mich., said in a statement Wednesday. “That’s why I believe the USMCA will make some progress for Michigan and why I supported the USMCA when it came before the Senate for a vote.”

The deal now awaits Canada’s approval.  

Alexa St. John contributed to this report.