Tariff-Exempt Exports Top 80% as Canadian Companies Scramble to Comply with CUSMA

United States President Donald Trump has prompted a flood of companies to become eligible for protection from duties under the Canada-United States-Mexico Agreement (CUSMA) after ratcheting up tariffs on Canadian goods that were not, according to Fitch Ratings Inc.

The ratings agency this week said 81 percent of goods exported to the U.S. from Canada were compliant with CUSMA, up from just 56 percent in May, according to its calculations.

Some companies had to complete or obtain additional paperwork to document the origin of their supplies and production, while others had to shuffle their supply chains to meet thresholds set for goods obtained and produced using North American materials and facilities.

“If something is largely made (and) sourced in Canada or the U.S., it seems like it was just a matter of paperwork,” Douglas Porter, chief economist at Bank of Montreal, said. “However, if a great deal of the value added was, say, from China … that’s where the ‘changing supply chains’ will come into force.”

He said Fitch’s data suggests enough goods are now in compliance with the trade pact so that non-sector-specific tariffs – those outside hard-hit industries such as steel and automotive – won’t have much impact on the Canadian economy.

“The reality is that if something can’t be made (CUSMA)-compliant, then it obviously has a very high non-North American content that can’t be switched … but that also means that it wasn’t adding that much to Canadian (gross domestic product) in any event,” Porter said.

Read more in an article from Yahoo Finance.