COMMENTARY:
Per agreement between the three North American trading partners, the U.S.-Mexico-Canada-Agreement (USMCA) will be reviewed on its six-year anniversary in July 2026. Three paths for the partners lie ahead. They can review the trade agreement and do nothing. They can review the agreement and make agreed-upon changes. This would seem to be the logical route, since trade is not static and trade agreements have to be updated to reflect changes in the global environment. The last choice is the nuclear option, which is to meet in July and one or more of the partners decides to withdraw from the agreement, which was negotiated to have a 16-year initial life.
As we proceed towards July, some worrisome factors pertaining to the USMCA have occurred. On January 13, while touring a Ford factory in Dearborn, Michigan, President Trump commented on the Canadian and Mexican automotive markets, “The problem is we don't need their product. You know, we don't need cars made in Canada. We don't need cars made in Mexico. We want to make them here. And that's what's happening." At a Detroit Economic Club meeting in Detroit, Michigan later that day, President Trump commented about the USMCA, "There's no real advantage to it, it's irrelevant. Canada would love it. Canada wants it. They need it."
The truth is that no automobile built by any USMCA partner is 100 percent native to that nation. Vehicles sold by the Big Three U.S. automakers have components and/or labor based in Mexico and Canada. The same is true for vehicles built in our North American neighbors, which can have components and labor based in the U.S. After Trump’s remarks on the Canadian and Mexican automotive markets, General Motors President Mark Reuss reaffirmed this fact by stating, "Our supply chains go all the way through all three countries. It's not simple. It's very complex,” he said. “The whole North American piece of that is a big strength." Being able to access the best research, engineering, components, and labor in the U.S., Canada, and Mexico, make North America a competitive place to produce vehicles.
After Trump’s February 24 State of the Union Address, U.S. Trade Representative Jamison Greer spoke to the Canadian Broadcasting Corporation and indicated that Canada should not expect a future USMCA without additional tariffs imposed on Canada by the U.S. "When we go to other countries, and we make a deal with them, they agree that we can have a tariff on them. If Canada wants to agree that we can have some level of higher tariff on them while they open up their markets to us on things like dairy and other things, then that's a helpful conversation,” stated Greer. This point of view seems completely contrary to the very spirit of free trade agreements, which are negotiated to bring down barriers to trade such as tariffs, in order to spur trade.
Also alarming, concerning the USMCA, is Canada’s move to a hardline stance when dealing with the U.S. on trade matters. After reassuming office last year, Trump quickly slapped tariffs on Canadian and Mexican imports. Initially, it was unclear whether these tariffs applied to imports protected by the USMCA. Eventually, it was clarified that the tariffs did not apply to these protected imports. However, using Section 232 tariffs, which a president can invoke if a perceived national security threat presents itself, Trump slapped tariffs on steel and aluminum imports into the U.S. This did include tariffs on these types of products from Canada and Mexico. Approximately 98 percent of Canadian exports to the U.S. can claim some type of preferential treatment under the USMCA.
Canadians were outraged at these tariffs and by Trump continuously referring to Canada as the 51st state of the U.S. A recent poll by the Angus Reid Institute revealed that 67 percent of Canadian adults preferred that their country take a harder-line stance on trade negotiations with the U.S., even if it angers the Trump Administration. This stance is being echoed by Canadian Prime Minister Mark Carney, who stated that both the U.S. and Canada have what he calls “trade irritants” that cause trade friction or disputes. However, Carney also stated that “It’s not a case of the United States dictates the terms. We have the negotiations. We can come to a mutually successful outcome. It will take some time.”
Carney emphasized that in any negotiations, people ask for concessions, but that Canada has its own negotiating strengths, and therefore has its own options, which it was diversifying. It sounds like Canada is resigned and ready for a head-to-head battle come July. It is probable that the Trump Administration, which chooses bully tactics when negotiating, didn’t expect its treatment of Canada to strengthen its resolve as pertains to the UMCA.
Preliminary talks by teams representing the USMCA partners are already taking place as a prelude to the July review. Let’s hope that these meetings help de-escalate the rhetoric and lead to a productive review and negotiation.
Jerry Pacheco is the president of the Border Industrial Association.
Jerry Pacheco's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU.