Regional Trade Deals: From NAFTA to USMCA

Alongside global rules, countries sign regional and bilateral trade agreements that cut barriers further among members. The North American Free Trade Agreement among the United States, Canada and Mexico took effect on January 1, 1994, eliminating most tariffs over time and creating deeply integrated supply chains, especially in cars, where parts might cross borders several times before final assembly.

Trade among the three countries grew substantially. Supporters credit NAFTA with lower prices, more efficient production and Mexican export growth; critics blamed it for job losses in some US manufacturing towns and for hurting Mexican small farmers competing with subsidized US corn, though economists debate how large these effects were compared with technology and Chinese competition.

NAFTA was renegotiated as the United States–Mexico–Canada Agreement, which took effect in July 2020 with stricter rules of origin for cars, labor provisions and a review clause. Regional deals raise a trade-off between creating new trade and diverting it from more efficient outsiders.