How the U.S.-Mexico Pact Could Turn Tables on China
A new Nafta might leave Beijing at a disadvantage, even isolated.
Trump’s phone call with President Enrique Pena Nieto to announce the trade deal.
Photographer: Al Drago/BloombergWhen President Donald Trump announced a trade pact with Mexico to replace the North American Free Trade Agreement, attention immediately turned to Canada. But it’s in China — which wasn’t mentioned — that the greatest impact could be felt.
In abandoning Nafta, the U.S. appears to be moving toward a single trade bloc that might also embrace Canada. The Mexico accord tightens rules of origin on automobiles, so that 40 percent to 45 percent of their content must be made by domestic companies whose workers earn at least $16 an hour. This limits the scope for assembly in Mexico with Chinese components, favoring higher-value parts from manufacturers covered by the agreement.