US rejects USMCA trade deal, toppling a pillar of global trade

Six years to the day after the U.S.-Mexico-Canada trade deal took effect, the Trump administration on Wednesday announced plans to end a deal widely seen as a successful and stabilizing force in North America’s three largest economies.

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Instead of renewing the deal, a senior Trump administration official told reporters, the United States would begin a decade of negotiations on amendments to it.

One potential outcome of these negotiations is that Washington could enter into separate bilateral trade agreements, one with Mexico and the other with Canada.

This decision, announced by the administration for several months, nevertheless represents a clear turnaround for President Donald Trump, who negotiated and signed the USMCA agreement in 2018 after withdrawing from the North American Free Trade Agreement.

A year later, Trump called USMCA “the best and most important trade deal America has ever made” on social media.

Seven years later, the administration now says that the agreement failed to achieve its objectives of modernizing and rebalancing trade between the three countries.

“The main issues that the president has been focused on with the world, and particularly with Canada and Mexico, is our trade deficit,” a senior Trump administration official said on the media call.

“When the USMCA was passed six years ago by a bipartisan majority and with the approval of the president, the idea was that we would modernize the agreement and that would also lead to a rebalancing. The agreement was successful in modernizing the agreement,” the official said. “But when it comes to rebalancing, our trade deficits with Mexico and Canada have exploded under the Biden administration. »

“We’ve started to get it under control, but we think the USMCA hasn’t worked to control the deficit as the president intended, so that’s really the heart of the problem,” the official added.

The collapse of the USMCA, widely seen as one of the few remaining pillars of stability in the Trump-era world of global trade, will amplify economic uncertainty for businesses large and small in all three countries.

However, the senior Trump administration official stressed that the White House was not interested in extending negotiations for the full 10 years, saying periodic reviews were a feature of the deal.

“It’s called the joint review, and the idea was to ensure that any deal between Mexico, Canada and the United States always puts America first, rather than letting a trade deal linger on autopilot for decades,” the official said.

From the start of his second term, Trump made drastic global tariffs the centerpiece of his economic policy. In this context, he and his collaborators have repeatedly challenged tariff exemptions on USMCA-compliant products, which are at the heart of the agreement.

But there were also hints Wednesday of the more focused animosity that developed between Washington and Ottawa during Trump’s second term.

Specifically, the senior official took issue with Canada’s decision last year to retaliate against Trump’s tariffs.

Mexico, which has not imposed retaliatory tariffs, is in talks with the White House about the future of the deal, the Trump administration official told reporters.

Dominic LeBlanc, the Canadian minister responsible for trade relations with the United States, said in a statement Wednesday that he met with U.S. Trade Representative Jamieson Greer earlier in the day and that Canada was “unwavering” in its support for the trade deal.

“Canada enters these discussions from a position of strength and with the goal of preserving and strengthening one of the most successful trading relationships in the world,” LeBlanc said.

He also made a not-so-subtle dig at Washington, declaring: “At a time of global economic uncertainty, Canada is a stable, reliable and trustworthy partner.” »

LeBlanc noted that the agreement “remains in full force until 2036 and may be renewed at any time for another 16 years.”

Since its implementation in 2020, the USMCA has undoubtedly boosted trilateral trade between the three parties.

“Total intraregional merchandise trade” increased from $1.07 trillion in 2020 to more than $1.63 trillion in 2024, according to a Brookings Institution study.

In the United States, businesses and trade groups have expressed mixed feelings about the USMCA.

“North American economic integration generates enormous competitive advantages for the region,” the American Automotive Policy Council said in a statement Wednesday.

But the group also asserted that U.S. automakers “face a disadvantage when compared to imports from countries whose exports are subject to flat 15 percent tariffs and are not subject to comparable rules of origin. We call for a swift and lasting resolution that ensures a level playing field and provides the long-term certainty needed for capital-intensive automotive investments.”

The Business Roundtable, which represents many of America’s largest companies, from JPMorgan Chase and Home Depot to Hilton and Pepsico, said the deal resulted in “significant economic benefits.”

“As the agreement reaches this important milestone, the three governments can better align their policies against unfair trade practices, reduce regulatory and economic frictions within the region, and ensure that North America is better positioned to compete with non-market economies,” the business group said, urging Washington to “strengthen and expand the USMCA.”

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