renewal of United States-Mexico-Canada Agreement It was never easy. However, President-elect Trump announcement He is expected to issue an executive order this week imposing 25% tariffs on all imports from Mexico and Canada, threatening the accord that is the framework that guides free trade and economic growth in North America.
The USMCA was signed in 2020 and is scheduled for renewal in 2026, with negotiations between the three countries likely to begin early next year. The incoming administration has a history of using tariffs as a weapon, but moving away from or weakening the USMCA would be a devastating blow to Americans, the American economy, and our allies in Canada and Mexico. Probably.
President Trump may be using tariffs as a dubious tactic toward a better deal, rather than as a club to beat neighbors and undermine the vital USMCA. Doing the latter would weaken the United States, alienate its two largest trading partners, and open the door for Chinese intrusion.
The president-elect said the tariffs he will introduce as one of his first actions on Inauguration Day are “aimed at stopping wars.”intrusion' drug and immigration flows into the United States have been stopped and will remain there until these flows are stopped. But using this tool to address issues that end up on the domestic agenda violates the USMCA and is a questionable approach at best.
Mexico gave further reason for concern. This fall, sweeping legislation went into effect. judicial reviewThis includes constitutional amendments to overhaul the judicial system, most notably requiring popular election of judges at all levels of Mexico's court system.
These changes, most of which will begin to take effect in 2025, threaten to politicize and destabilize the judiciary and undermine judicial independence. If Mexican courts cannot be trusted, it is natural to wonder whether the country's rule of law can continue to guarantee equal legal treatment for partners and international investors.
There are also thorny issues between the United States and Canada. In June, Canada enacted a 3% digital services tax, which would make the U.S. file a complaint It argued that the tax unfairly discriminates against U.S. companies under the USMCA.
Given that the Biden administration is in its final weeks, it is unclear whether the U.S. Trade Representative will escalate the dispute or leave it to the Trump administration to resolve. Trump has already said He is clearly opposed to digital taxation.
canadian officialMeanwhile, countries have expressed concerns about both President Trump's tariff proposals and Mexico's judicial reforms, but have focused on the strong ties between the three countries.
Meanwhile, Mexican President Claudia Sheinbaum I was warned last week If President Trump imposes tariffs, Mexico will retaliate with its own tariffs on U.S. goods, adding that economic retaliation ultimately helps no one and harms everyone. did.
When the USMCA was signed into law in 2020, it included new provisions regarding its content. Review and extension. Six years after the launch of the USMCA, all three countries will participate in the review.
The United States, Canada and Mexico will then have to decide soon whether to extend the agreement for another 16 years. A Congressional vote on renewing the USMCA must occur by July 2026, so negotiations would need to begin in early 2025.
In this series of exchanges, the issue is China, a country against which President Trump has pledged to impose tariffs. The United States and Canada expressed concern that exports from China to Mexico are flowing into both countries and that USMCA rules need to be strengthened to address this issue.
With President Trump likely to impose new tariffs on Chinese products, US officials China is likely opening up other avenues into the U.S. market where its products can avoid heavy tariffs, such as setting up manufacturing operations to finish products made with Chinese inputs. I'm thinking.
This comes as China increases its trade and influence in Mexico. Mexico replaced China as the United States' largest trading partner in 2023, but trade between Mexico and China increased during the same period.
cargo analysis It showed that container trade from China to Mexico increased by more than 26 percent between January and July this year. USMCA renewal negotiations are an opportunity to update rules and address the transshipment of Chinese goods to the United States via Mexico.
Finally, the United States needs a strong North American trade agreement to maintain the momentum of bringing manufacturing and jobs back to our states.
Supply-side shocks from the pandemic and growing political pressure to move sourcing outside of China have led some U.S. companies to consider sourcing closer to home. U.S. companies are nearshoring their sourcing to Mexico and integrating it into a consistent North American supply chain, or are planning to do so. That approach is now in jeopardy.
It is difficult to overestimate the importance of the USMCA to all three countries. For the United States, this relationship is of paramount importance. As mentioned above, Mexico is currently the United States' largest trading partner, with Canada in second place. In total, about $1.6 trillion In US trade. If the agreement is allowed to expire, it will undoubtedly have a negative impact on the US economy.
All three countries have strong incentives to renew the USMCA, although there are some challenges associated with renewing the USMCA. In his first term, President Trump threatened: withdraw the United States from NAFTAAlthough it was the predecessor to the USMCA, it ultimately negotiated a powerful new agreement. Hopefully, he will pull back from the brink and reinvigorate the three countries to reaffirm the agreement that has been the economic glue and fuel for North America.
Orit FrenkelPh.D. is the co-founder and CEO of. american leadership initiative. She is a former senior executive at General Electric Company and served as Director of High Technology Products Trade in the Office of the United States Trade Representative.
