President Trump signed the U.S.-Mexico-Canada Agreement, or the new NAFTA, in a festive White House ceremony Wednesday as the impeachment trial against him rolled on in the Senate.
The signing marks another milestone in a trade agenda that overall has led to diplomatic tensions and tariffs that have flustered retailers, who generally support USMCA but are still looking to resolve their other tariff woes.
The USMCA, which passed the Senate with the bipartisan stamp of approval in an 89-10 vote, is expected to go into effect this summer, with some provisions unfolding over the following year or so. Retail industry groups will have a role in its implementation.
The deal largely resembles its predecessor, the North American Free Trade Agreement that began in 1994, but makes some changes to its apparel rules. Notably, the USMCA introduces a requirement that so-called “secondary textile components” including thread, narrow elastics and pocketing fabric be produced in one of the three countries in the agreement in order to be imported to the U.S. duty-free.
“Those are big changes for the apparel rules in the USMCA compared to NAFTA,” said Nate Herman, senior vice president of policy at the apparel trade group American Apparel & Footwear Association. “Those changes will transition over a period of time, and we want to make sure that the transition is seamless and smooth.”
Though the deal passed the Senate with a majority, a handful of Democrats voted against it, citing concerns about the agreement’s silence on climate change. Senators including Ed Markey, D-Mass., and Senate minority leader Chuck Schumer, D-N.Y., voted “no” on the USMCA, pointing out that climate change is not explicitly mentioned in the deal, besides the more general provisions addressing the deal’s environmental impact.
Meanwhile, the focus of retail lobbying groups remains on the continuing negotiations between the U.S. and China, which is where a significant chunk of apparel and footwear sold to American consumers is made.
Earlier this month, President Trump and Chinese Vice Premier Liu He signed the so-called phase one deal in another White House ceremony. The agreement, struck in December, hit pause on a new round of tariffs for Chinese-made goods and also eased duties imposed in September, cutting the levy to 7.5 percent from 15 percent.
The AAFA has said that most of the products imported from China affected by recent U.S. tariffs, including 92 percent of the apparel, 53 percent of the footwear, 68 percent of the home textiles imported from China, would still be affected by tariffs after the phase one agreement.
And retail observers said although they supported the tariff relief included in the phase one deal, they are looking forward to more negotiations in phase two that they hope will lead to more tariff cuts.
“The most important thing about ‘phase one’ is that it brought the Chinese government and the U.S. to talk,” said David French, senior vice president of government relations at the lobbying group the National Retail Federation. “Ultimately we want to end the trade war — the trade war is not good for retailers, and it’s not good for consumers.”