The United States-Mexico-Canada Agreement (USMCA) has been a positive development, Dwight Morgan, Vice President of Corporate Development for M. Holland Co. (Northbrook, IL), a privately held, family-owned North American resin distributor, told PlasticsToday. “We’ve already seen the peso stabilize, which makes doing business in Mexico significantly easier,” said Morgan.
After examining the new agreement, Morgan noted that the deal itself is not that different from NAFTA. “Generally we view this deal as a net positive, not just because it’s settled but because it updates some things that needed to be addressed,” said Morgan.
Providing a brief overview of the USMCA, Morgan pointed out a few positives, including intellectual property protections and stronger labor provisions, which “affect mostly Mexico,” he said. “When you look at the plastics industry, just having some sense of stability going forward is very important and valuable and has us breathing a sigh of relief.”
Charles A. Sholtis, CEO of Plastic Molding Technology Inc. (El Paso, TX), a large custom injection molding company that does a lot of cross-border business, is also breathing a sigh of relief. “It is too soon to tell, but it would appear that the revised NAFTA may benefit U.S. manufacturers. I see more enthusiasm from a business confidence outlook,” he said. “Some uncertainty has been taken out of the mix.”
While the automotive industry is very relieved overall, the USMCA will impact the industry and raise the cost of cars to consumers. One of the changes is a higher USMCA content requirement. Labor and wage rules specific to the auto industry require a certain percentage of workers in Mexico to be paid $15/hr. “Whether Mexico can do that and remain competitive is the question,” said Morgan. “We’ll probably see higher costs for vehicles built in Mexico.”
Sholtis explained that the USMCA mandates that a higher percentage of parts for any tariff-free vehicle—totaling 40% in 2023—be sourced from a “high wage” factory, presumably in the United States. “The administration hopes the provision will force automakers to shift suppliers from Mexico to Canada or the United States,” he said.
Humberto Garza, CEO of Evco Plastics de Mexico, a division of global custom injection molding company Evco Plastics (DeForest, WI), commented to PlasticsToday: “The new automotive manufacturing rules are most interesting to us, given that the North American content of origin is jumping from 62.5% to 75%.
“It’s possible this change will result in new North American investment in various manufacturing sectors in the future to close the 12.5% North American content gap,” Garza added.