Canada has won a trade dispute with the U.S. over motor vehicles that are shipped across borders, a ruling that provides manufacturers with more incentive to make automotive parts in their home nation.
The dispute-resolution panel set up under the 2020 US-Mexico-Canada Agreement made a preliminary ruling that favours both Canada and Mexico, and rules against the U.S. in the trade dispute.
The trade battle centres on how to calculate the percentage of a vehicle that comes collectively from the three countries under the current North American trade deal.
The ruling is likely to benefit both consumers and automakers because it will enable manufacturers to build more vehicle parts and components in Canada and Mexico, where workers’ wages are generally lower than in the U.S.
Both Mexico and Canada argued that the current trade agreement stipulates that more regionally produced parts should count toward duty-free shipping than the U.S. wants to allow.
Motor vehicles are the number one manufactured product traded between the U.S., Canada, and Mexico, with tens of billions of dollars moving across the countries’ borders each year.
The U.S. government is expected to appeal the trade panel’s ruling.
