Earlier today, I wrote about how the evidence on the Section 301 tariffs against China, in place since 2018, demonstrates that they have not achieved their purported goal of ending unfair Chinese trade practices. Ed Gresser of the Progressive Policy Institute has written about the evidence from another of the Trump administration’s trade efforts that is still in effect, the USMCA trade deal.
“Trump administration negotiators in 2018 said their ‘primary objective’ in renegotiating the North American Free Trade Agreement was ‘to improve the U.S. trade balance and reduce the trade deficit with the NAFTA countries,'” Gresser writes. That didn’t happen at all, and trade deficits have increased by a combined $91 billion instead.
Gresser notes that one of the major areas in which the USMCA was substantially different from NAFTA was in automobiles. This, too, was a priority of the Trump administration. “I didn’t know too much about the car industry, but I did know that you were losing all your jobs,” Trump said in a speech in Michigan in 2020 celebrating the USMCA’s passage. “But we stopped it. And this deal really stops it. And now they’re all coming back because they want to be where the action is.”
Gresser looks at the data and finds that U.S. automobile production is basically the same now as it was before the USMCA. During NAFTA’s 26 years, U.S. production averaged 10.7 million cars per year. In 2023, it was 10.6 million.
Overall trade flows likewise have not changed. “Last year’s 8 million in new car and truck imports were about the same as those of 2016, with a few more from Mexico and a few less from Canada,” Gresser writes.
Interestingly, Gresser found that about 20 percent of car imports from Mexico in 2023 came from outside the USMCA’s requirements, with Americans paying the most-favored-nation tariff instead of purchasing the cars duty-free. Under NAFTA, that was only 1 percent. Some car producers might be opting to pay the tariff instead of going through all the work of complying with USMCA’s stricter rules of origin.
The pre-pandemic peak in employment in the manufacture of motor vehicles and parts was 1,013,000 in January 2019. Today, the sector employs 1,064,000. Zoom out further, and employment is roughly in line with its trend since the Great Recession, which has been a gradual increase. It doesn’t appear that there were any major changes in employment, either.
Gresser notes we should be cautious not to overinterpret these results since the trade agreement is still relatively new. But there’s no evidence yet of the USMCA creating any major swings in U.S. car production patterns or employment, almost four years after it went into effect.