The United States Mexico and Canada (USMCA) agreement would have a "moderate" overall impact on the USA economy, according to a report from the International Trade Commission (ITC) released Thursday.
Its findings are significant because it is widely viewed as a neutral body that can provide a sober assessment of the economic merits of the new deal, which faces growing opposition - primarily from Democrats who want to deny Trump a political victory on a trade deal he sees as positive.
Trade-wise, the USMCA is expected to have a positive impact on USA trade, both with regional partners and globally.
The administration is preparing a public relations offensive, as an analysis showing little or no US gains from the changes would be a setback for Trump and give some Democrats an excuse to deny him a major political victory.
Trade between the United States, Mexico and Canada is also likely to increase, according to the report - with USA exports rising by about the same amount as its imports from the two partners.
Signing of the USMCA on Nov, .
The complicated content formula for what constitutes a North American-made auto - known as rules of origin - and updated labour provisions aimed at Mexico were key issues in the contentious NAFTA renegotiation.
Under the model used by the US ITC, total US GDP would increase as a result of the agreement by just 0.35 per cent, or around US$68 billion and the US should gain 176,000 new jobs compared to a scenario in which the current North American trade agreement remains in place, the report said. It would also require more vehicle parts to be made by workers earning at least $16 an hour.
The estimates include about $15.3 billion investments previously announced by Fiat Chrysler, Ford Motor, General Motors Toyota Volkswagen and battery maker SK Innovation.
AAPC's Matt Blunt said the Big Three automakers supported the USTR's conclusions about the new NAFTA replacement. When the Congressional Budget Office scored the President's first budget in 2017, it said that the administration overestimated future economic growth to the tune of $3.4 trillion in tax revenue over next decade.
The ITC's estimates are for year six of the trade deal, once it is fully implemented.
To reinforce that point it released its own analysis in which USTR said that the USMCA would lead to US$34 billion in new automotive investment in the USA and 76,000 new jobs in the sector in the first five years.
Automakers could decide not to comply with the new rules, and instead pay the relatively low 2.5% tariff on vehicles and auto parts moving across the border - as suggested by an International Monetary Fund study released last month. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, insist the president must remove tariffs on steel and aluminum imports from Mexico and Canada before a vote. He argued on Thursday that the agreement makes important updates to NAFTA on intellectual property, currency practices and digital trade - but that the impact on GDP of those changes "has historically been inherently hard for economists to measure".