Late Sunday, the US, Canada and Mexico finally reached a tentative agreement to replace the North American Free Trade Agreement (NAFTA).

Called the United States-Mexico-Canada Agreement (USMCA), the new deal was approved by President Trump after several days of intense negotiations. Meanwhile, Canadian Prime Minister Justin Trudeau called a cabinet meeting in Ottawa late Sunday night and the Mexican Economy Ministry presented the text of the agreement to the Mexican Senate.

The announcement came an hour before the White House-imposed deadline of midnight on September 30, which would give Mexican President Enrique Peña Nieto time to sign the agreement on his last day in office before President-Elect Andrés Manuel López Obrador succeeds him.

“USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region,” said the US trade representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland, in a joint statement. “It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.”

Good conversation with @RealDonaldTrump this morning – the new #USMCA is going to bring our countries even closer together and enhance competitiveness & prosperity, while creating new jobs for people across our continent: https://t.co/0B0O1r3W3t

— Justin Trudeau (@JustinTrudeau) October 1, 2018

In a press conference in the White House Rose Garden on Monday, Trump lauded the new treaty. “This landmark agreement will send cash and jobs pouring into the United States and into North America,” he told members of the press. “Good for Canada, good for Mexico.”

In August, the Trump administration announced that it had entered into an agreement with Mexico and said it hoped Canada would join them to make it trilateral; the administration was also willing to move ahead with two separate agreements, or not include Canada at all in a new agreement.

In the new agreement, Canada was successful in saving a key dispute-resolution provision, which Trudeau had been adamant about in recent months. Meanwhile, American farmers will now be able to sell more products into Canada’s long-protected dairy industry. The Trump administration will also not impose tariffs on most auto imports from Canada; the new agreement allows for 2.6 million Canadian passenger vehicles to come over the border into the US without being subject to a significant tax. The new cap is well above the 1.8 million that Canada currently exports. However, Canada was not able to get the US tariffs on steel and aluminum lifted.

Furthermore, Chapter 11 of the original agreement will be partially eliminated; that allowed for corporations to sue governments in front of special tribunals for interfering with their businesses. While it will be completely removed from the agreement between the US and Canada, it will still exist in a watered-down form between the US and Mexico.

Importantly for the promotional products industry, Canada has agreed to increase its de minimis threshold; under NAFTA, Canadian consumers could purchase just $20 worth of foreign merchandise online before incurring duty taxes. That limit has been raised to $100, under pressure from the US. In exchange, Canada will still be able to collect sales tax on purchases.

The deal is expected to be signed by Trump and his Canadian and Mexican counterparts over the next 60 days; it will then move to the respective governing bodies of the participating countries for approval, most likely in 2019. However, that process could be arduous if Democrats regain control of the US House of Representatives in November. Next year is also a federal election year in Canada. In Mexico, López Obrador has already stated he will not try to reopen talks once he takes office.

It concludes several months of uncertainty as all three parties wrangled over key issues, and especially after Trump announced a separate agreement with Mexico in August. “This is an important step for moving from the summer of disruption in global trade to an autumn of business resumption,” Daniel Ujczo, international trade and customs lawyer with cross-border firm Dickinson Wright, told ASI Canada. “There is good news in this deal for cutting red tape and providing economic certainty in North America.”

But Ujczo said there’s still work to be done in finalizing the agreement and pushing it through the US Congress next year. “All companies should be reviewing the publicly-available text and determining how this impacts their operations,” he added. He told the Washington Post that pushing the agreement through the respective governing bodies of the three participating countries will be a “heavy lift,” considering the political shifts on the horizon.

Canadian promo industry leaders reacted Monday after the news broke. “It’s difficult to know how our industry will be affected long-term until the complete terms of the agreement are released, but I’m cautiously optimistic,” Danny Braunstein, vice president of sales & business development for Talbot Marketing (asi/341500), told ASI Canada. “On a macro level, the handling of the new acceptable caps on the Canadian auto industry is the most significant development. That market represents a disproportionately large portion of the Canadian economy and a potential 20-25% tax on exports would certainly have trickled down to every industry in Canada, ours included. On a micro level, we’ll be watching closely to learn how North American-manufactured goods and lower-value shipments will be treated as we’re processing these types of cross-border shipments on a daily basis.”

Scott Hulbert, managing director at ideavation (asi/229801), said the promo industry will now benefit from better economic and pricing stability. “These last few months have caused real confusion given the new tariffs being implemented,” he told ASI Canada. “In terms of cross-border transactions, I don’t foresee any real change to the current situation. The real elephant in the room will be Trump’s stance on Chinese imports. This will continue to be the big question as we move forward.”

Others were concerned about US heavy-handedness during the talks. Ralph Goldfinger, CEO of the apparel division of Canada Sportswear (asi/43684), told ASI Canada that the US used a “divide-and-conquer” strategy by negotiating with Mexico first and then pressuring Canada to sign on. “This allowed the US to bargain its position in a more favorable manner,” he said. “The US won at the expense of Canada and Mexico.”

Goldfinger is also concerned that under the new agreement, additional apparel components, such as thread, pocket linings and elastic bands, will have to be manufactured in North America for the garment to move across the US and Mexico borders tariff-free. Currently, as long as the yarn to make a textile is North American-made, that textile is made in North America and the finishing of the garment was done in North America, that item of clothing could be sold in the US and Mexico without incurring tariffs.