What should we expect from Trump's new NAFTA?

President Trump declared a month ago that he had negotiated the key elements of a new NAFTA deal with Mexico.  US and Canadian negotiators continue to meet and have not yet come to terms.  Assuming that the Canadians do get on board, what should we expect in terms of economic impact?

Most of the attention in the press has focused on the provisions dealing with the automotive industry.  And here the news is not good for US consumers.  Right now cars imported by the US from Mexico must have 62.5 percent of the value of their components made in the US, Canada or Mexico.  The new deal ups the ante to 75 percent.  That means fewer components made in Asia and more made in North America which translates into higher costs.  

The deal also micromanages Mexican wage determination, requiring almost half of the value of a car imported from Mexico to be produced by workers making $16 an hour or more.  This will be a windfall for some Mexican workers, paid for by US consumers.  Gains for US auto workers are less likely as most of them make well above $16 per hour.  

Mexican imports are a key part of automotive supply chains, not just for GM, Ford and Fiat Chrysler but also for Toyota and Honda.  The auto companies will have to decide whether to accept higher costs on duty-free Mexican imports under NAFTA versus redirecting their supply chains to Asia and paying whatever tariff has to be paid.  

US consumers also will react; higher prices for cars made in North America will lead to increased demand for Kias and Volkswagens.  

NAFTA is 25 years old and certainly needs some updating.  WP reports the new NAFTA will address intellectual property, worker rights and environmental concerns.  Ironically the new NAFTA's provisions on these issues are very close to those in the Trans-Pacific Partnership, signed by Mexico and Canada, but rejected out of hand by both Trump and Hillary Clinton.  

It is still not clear whether Canada will sign on to the deal.  With or without Canada, any new deal will have to be approved by Congress.  The main economic consequence right now is increased uncertainty which is freezing investment decisions by companies who had counted on relatively open borders in North America.