The North American Free Trade Agreement (NAFTA) was a trilateral trade treaty that created one of the world's largest free trade blocs between the United States, Canada, and Mexico. It was signed in 1992 and came into force on January 1, 1994, superseding the 1988 Canada–United States Free Trade Agreement. The primary problem it aimed to solve was the existence of trade and investment barriers between the three countries, with the goal of fueling economic growth and helping American companies compete internationally.
NAFTA's core mechanism involved the gradual reduction and eventual elimination of most tariffs, customs duties, and other trade barriers on goods and services traded between the signatories. Key provisions ensured eventual duty-free access for a vast range of manufactured goods and commodities, with some tariffs eliminated immediately and others phased out over periods up to 15 years. The agreement also included chapters covering rules of origin, investment, trade in services, protection of intellectual property rights, and dispute settlement procedures. It was connected to two side agreements: the North American Agreement on Labor Cooperation (NAALC) and the North American Agreement on Environmental Cooperation (NAAEC).
NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA), which went into effect on July 1, 2020. While the USMCA is often characterized as "NAFTA 2.0" because it maintains most of the original market-opening measures, it introduced significant changes. The new agreement includes stronger enforcement mechanisms for labor provisions, increased incentives for automobile production in the U.S. through higher Rules of Origin requirements (75% regional value content, up from 62.5% under NAFTA), and greater access to Canada's dairy market for U.S. farmers. The USMCA also modernized the agreement with new provisions on intellectual property and digital trade.