Image via Shutterstock
Image via Shutterstock

Mexico and Canada are the state’s biggest exporters.

After more than a year of discussion over trade deals, Rep. Harley Rouda (D-CA) voted to approve the United States-Mexico-Canada Agreement (USMCA) along with a bipartisan group of House members last month.

The USMCA now heads to the Senate, where a vote is expected later this year. California is one state that relies heavily on trade deals like the USMCA to support its industries. Not only is the Golden State a major economic powerhouse on a national level, on a global stance it ranks as the world’s fifth largest economy. And Mexico and Canada play a big role in California’s economy, ranking in first and second place, respectively, on the list of countries to which the state exports.

According to Rep. Rouda, the USMCA is beneficial because it provides certainty to businesses so that they can grow.

“Passage of the USMCA is a win for California businesses, farmers, innovators, and workers. I thank my colleagues on both sides of the aisle for their dedication to ensuring economic success for millions of Americans,” Rouda said in a statement.

The USMCA will replace the 25-year-old North American Free Trade Agreement (NAFTA), but the goal of the trade agreements remains the same: to reduce restrictions, encourage investment and increase market access, according to the International Business Center at Michigan State University.

According to the Economic Policy Institute, the NAFTA agreement led to a trade deficit between the three countries and displaced over 800,000 U.S jobs, most of which were high paying positions in the manufacturing industry.

There are some notable differences between NAFTA and the USMCA. For example, under the NAFTA deal, 62.5% of car parts needed to be made in the U.S, Canada or Mexico in order to receive zero tariffs. Under the new USMCA, 75% of parts need to be made in one of the three countries to qualify for zero tariffs. The intent is to strengthen manufacturing in the three countries as well as increase the automotive workforce.