NAFTA is gone, replaced by largely the same agreement with a different name. Talk about tinkering around the edges. The USMCA—a forgettable acronym—stands for the United States-Mexico-Canada Agreement. But an agreement on what? An agreement to keep NAFTA going with a few tweaks. First, the table stakes. Figure 1 shows each nation’s respective annual trade with the others, a sum of $1.24 trillion.

Figure 1: Annual North American Exports (in US$ Millions)

Tweaks

One of the big sticking points for Trump was the requirement to increase the percentage of each automobile coming from one of the three nations. The rate will rise from five-eighths of the car to three-quarters under the USMCA. The net effect is that the three countries can “stick it” to China. That is a political winner for all three, so long as auto inflation is tame. Some minimum wages for auto workers were also added, a burden shouldered by Mexico.

Canada was the wild card because Mexico and the U.S. agreed in principle to terms several weeks ago. As we get into the numbers, use U.S. and Canadian GDP of $20.4 trillion and $1.74 trillion, respectively, for context.¹ That gives reason to collectively yawn at the new allowance for 3.5% U.S. market share in the $16 billion to $20 billion Canadian dairy industry. This is a commercial opportunity worth less than $1 billion, frankly.

The much-maligned steel and aluminum export tariffs remain. This too is an afterthought. With steel equal to 1.5% of Canada’s export total, and with 91% of it going to the United States, about $4.5 billion worth of Canadian steel will be affected. But as we pointed out in basically every trade-related piece we wrote this past summer, levying a tariff does not make all cross-border trade disappear.² Even if the 25% levy causes half of Canadian steel exports to the U.S. to completely evaporate, we are talking about $2.25 billion. Also, from a global perspective, presumably most or all of the disappeared Canadian steel would shift someplace else, seemingly the U.S. Again, we are talking about two economies collectively worth about $22 trillion, yet the news cycle is harping on a few billion dollars.