Every day, more than $4 billion worth of goods cross the United States’ borders with Canada and Mexico — U.S. auto parts headed for car factories in northern Mexico, cartons of Mexican avocados bound for California supermarkets, Canadian aluminum destined to become cans of Campbell Soup, according to an Associated Press report.
Much of this bustling cross-border commerce is duty-free, thanks to the US-Mexico-Canada Agreement, or USMCA, that President Donald Trump negotiated with America’s northern and southern neighbors during his first term.
But the future of the USMCA, which took effect July 1, 2020, is cloudy as the three countries begin what could be a tempestuous attempt to renew the pact this year. The United States is demanding changes to the treaty, and the top U.S. trade negotiator told Politico in December that Trump would be willing to pull the United States out of the pact if he can’t get the deal he wants. Trump also suggested last fall that the United States could negotiate separate deals with Canada and Mexico, ending the three-country North American bloc that previous administrations saw as crucial to competing economically with China and the European Union.
The North American economies could agree to renew USMCA as it is for another 16 years— a prospect that appears unlikely. Or they could keep working on ways to improve it; under a convoluted renewal process, 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 – an option that Canada and Mexico, heavily dependent on trade with the United States, fear the impulsive Trump might end up choosing.
At stake is $1.6 trillion worth of annual trade in goods between the United States and its two USMCA partners. Mexico and Canada are far ahead of China in both exports to and imports from the United States. American farmers are especially keen to see the deal renewed: Last year, they shipped nearly $31 billion in agricultural products to Mexico and $28 billion to Canada.
