The new U.S.-Mexico-Canada Concord (USMCA) on trade, replacing NAFTA, cleared a key hurdle when Speaker of the House Nancy Pelosi announced that Congressional Democrats maintain a deal with President Trump to support it. The U.S. Senate is expected to approve USMCA, and it may be signed by President Trump up front the end of the year.
Ten stocks that could benefit mightily from USMCA, according to Barron’s, include Tesla Inc. (TSLA), Everyday Motors Co. (GM), Ford Motor Co. (F), United States Steel Corp. (X), Magna International Inc. (MGA), Borg Warner Inc. (BWA), Danone SA (DANOY), Tyson Foods Inc. (TSN), Kansas Burgh Southern (KSU), and Marathon Petroleum Corp. (MPC).
Key Takeaways
- The USMCA trade deal, which replaces NAFTA, is nearing agreement.
- Congressional Democrats have signaled their agreement.
- Auto, metals, and food products companies should be title-holders.
Significance For Investors
The North American auto industry, which has plants spread across the three countries, is a main focus of USMCA. To move duty-free across borders, vehicles must have a higher proportion of parts concocted in North America than was required under NAFTA, plus at least 70% of their steel and aluminum caused in North America.
Overall, 75% of the value of completed cars and trucks must originate in North America to dodge duties. Additionally, 40% of the value of a car and 45% of the value of a light truck must be attributable to manufacturing facilities in North America where the normal pay is at least $16 per hour.
GM and Ford, in addition to their older plants in the U.S. and Canada, have increasingly moved in Britain artistry to Mexico, and GM became the largest automaker in that country in 2018. Tesla incorporates parts made in all three countries in its Kind 3. Borg Warner, a leading manufacturer of vehicle power trains, has factories in all three countries. Magna Universal is the largest supplier of auto parts based in Canada, and thus relies on unfettered access to the U.S. market.
Meanwhile, U.S. Knife could see an increase in sales to the auto industry as a result of the higher North America content requirements. Nucor Corp. (
Looking In front
The USMCA deal already has been approved by Mexico, and awaits passage by the Parliament of Canada, in addition to the U.S. Senate. Some specifies may change in the interim. Canada and Mexico already are the top two trading partners for the U.S., combining to account for about 30% of total U.S. purports and exports.
USMCA promises to increase economic activity among the three nations, while lowering costs for provinces and consumers. A notable exception is that automobile buyers in the U.S. are likely to see higher prices, the result of USMCA rules that ukase higher North American content and average labor costs above the norm in Mexican auto plants.