Tourists from Chattanooga check into beach resorts in Cancun. Canadian auto parts feed factories in the American Midwest – and vice versa. Happy hour revelers raise glasses of Mexican tequila and mezcal at bars in Seattle.
It adds up. The United States trades $1.9 trillion a year — $5 billion a day — worth of goods and services with its neighbours, Canada and Mexico. They have supplanted China to become America’s top two trading partners.
So the stakes are high when it comes to fiddling with the rules that govern trade between the three countries. And after a year of President Donald Trump’s chaotic tariff policies, many US, Canadian and Mexican businesses would welcome the return of stability across North America.
They are not likely to get it.
The regional trade pact — the US-Mexico-Canada Agreement or USMCA — that Trump negotiated and boasted about in his first term comes up for renewal Wednesday, a process that is likely to last months, maybe longer.
And the path forward is lined with landmines.
“There’s going to be a lot of drama this summer,” Diego Marroquín Bitar, a fellow in the America’s program at the Center for Strategic and International Studies, said last week at a USMCA forum sponsored by the Cato Institute.
The US is making demands that could effectively force Canada and Mexico to surrender some automaking production to the United States. That might bring more auto factory jobs to the United States. But it would also upend established supply chains and would push up US prices for new cars that now average nearly $50,000 at a time when American consumers are already frustrated about the high cost of living.
Trump, characteristically, has added to the tension by threatening to pull out of his own agreement altogether.
In 2020, the USMCA replaced the 1994 North American Free Trade Agreement, which tore down most trade barriers between the three North American countries.
Trump and other critics had called NAFTA a job killer because it encouraged US companies to move factories south of the border to take advantage of low-wage Mexican labor, then ship goods back to the United States duty free.
His USMCA ended up being similar to NAFTA — though it pressured factories to pay higher wages and make sure that more of what they made originated in North America in an effort to prevent Chinese products from slipping across regional borders duty free.
The USMCA included a novel provision requiring the pact to be renewed every six years. That deadline is Wednesday, but “nothing is going to happen July 1,’’ said Oscar Ocampo, director of economic development at the Mexican Institute for Competitiveness.
Negotiators could agree Wednesday to renew USMCA as it is for another 16 years. But that is considered highly unlikely. Instead, they are expected to keep working on ways to improve it; they have until 2036 to reach an agreement — or the pact expires.
Meantime, any USMCA country can pull out of the pact provided it gives its two partners six months’ notice — a red buzzer that Canada and Mexico, dependent on trade with the United States, fear Trump just might push.
Trump, after all, said in June that he was “not looking to renew’’ the trade pact with Canada and Mexico. “We don’t need anything that they have,” he said.
Ocampo suspects that Trump doesn’t really want to drop the treaty; he just wants to use the uncertainty to keep pressure on Mexico over security and immigration issues.
