The dust has started to settle on the new United States Mexico Canada Agreement (USMCA) trade deal between Canada, the United States and Mexico. Although it still needs to be ratified, there are some clear winners and losers as far as American small business goes. Small Business Trends did some research and reached out to some experts to get their opinion of the new arrangement.
NAFTA is Being Replaced By USMCA
David Reischer is the CEO and Founder at LegalAdvice.com in NYC. He says there’s a good and bad side to the deal as far as American small businesses are concerned in relation to places like Canada, Asia in general and China in particular.
Businesses Benefiting from Cheap Chinese Goods will Be Hurt
“It appears from a preliminary analysis of the USMCA that the deal is a good first step to solidifying our relationship with our northern and southern neighbors,” he writes in an email. “Consumers and businesses that have benefited from low cost China finished goods are the losers of the USMCA.”
On at least one front, the new deal appears to be further isolating China from dealing with the three countries involved in the USMCA at the cost of American small businesses. For example, Section 32, restricts members of the deal (Canada, Mexico and the United States) from negotiating trades deals with non market countries like China.
Outsourcing to Other Countries Won’t be Affected
“The small businesses that will lose via the USMCA are those that import finished goods from China as no doubt higher tariffs are the future for companies that import finished goods from there,” Reischer writes adding there’s still a clear message of business as usual to other offshore locations.
“The important take away for small business owners such as myself is that there is no disruption of the relationship between other Asian and Pacific countries such as the Philippines and India.”
Car Dealerships May Face Sales Challenges with Rising Car Prices
Other small business owners saw the USMCA in much the same way. Nate Masterson is the CEO of Maple Holistics. He sees both a few pluses and several minuses for small businesses looking forward.
“By 2020, 30% of people working on cars in between the countries must be earning $16 per hour. This probably means more manufacturing jobs coming to the United States and Canada,” he writes while adding there might be a headwind to consider in this part of the deal.
“As the cost of manufacturing a vehicle goes up, we can be sure to see this passed along to the consumer. What does this mean for the car market? Probably, people will be inclined to keep their rust bucket, making the car salesman’s job that much harder.”
U.S. Dairy Farmers will Benefit
Masterson also pointed out that American Dairy farmers won a victory as they gained more access to the Canadian markets. Under the new deal, a certain Canadian pricing class for domestic milk will be done away with and American dairy farmers get an extra 3.6% more accessibility to Canadian markets.
Michelle Klieger, the president of Stratagerm Consulting, added some specifics.
“In the new agreement, Canada will provide new access for U.S. dairy products, including for fluid milk, cheese, cream, butter, skim milk and powder, and that nation will also eliminate its tariffs on whey and margarine.”
Klieger also notes Canada is a big market for American winemakers to the tune of $1.1 billion in sales last year.
As Will U.S. Winemakers
“USMCA helps winemakers and increases access for US wines by eliminating unfair grocery store practices in British Columbia that put U.S. wines at a disadvantage,” she writes.
Photo via Shutterstock
How about shipping goods from China? This is quite rampant in ecommerce. Will this be affected as well?
Aira, goods from China should not be impacted by the USMCA replacement. This agreement focuses on trade within North America. Canada and Mexico have considered or are considering separate agreements with China.