US declines to renew USMCA trade pact with Mexico and Canada, impacting $2 trillion trade

The United States has opted not to renew the US-Mexico-Canada Agreement (USMCA) in its current form, as announced by US Trade Representative Jamieson Greer on Wednesday. This decision, made on June 21, 2024, comes amid ongoing concerns regarding trade deficits and the effectiveness of the agreement.

Implications of Not Renewing the USMCA

The USMCA facilitated nearly $2 trillion in annual trade across North America in 2024. Although the agreement will remain in effect for another 10 years, it will now undergo annual reviews, creating a backdrop for complex negotiations on tariffs and sector-specific trade rules. Greer emphasized that the US will continue to engage with both Mexico and Canada to address what he termed the agreement's shortcomings.

This decision raises concerns for industries reliant on stable supply chains, particularly US automakers and farmers. The uncertainty stemming from the ongoing negotiations could disrupt established trade relationships and economic stability.

Trump's Changing Stance on the USMCA

The decision aligns with the evolving perspective of former President Donald Trump, who previously heralded the USMCA as a significant improvement over the North American Free Trade Agreement (NAFTA). Trump, who signed the USMCA into law in January 2020, has since expressed dissatisfaction with the agreement, labeling it as "irrelevant" and highlighting loopholes that benefit countries such as China.

During his first term, Trump described the USMCA as the "largest, fairest, most balanced, and modern trade agreement ever achieved." However, his recent statements indicate a desire to reevaluate the terms and potentially impose stricter tariffs on Canada and Mexico.

Future Negotiations and Expected Outcomes

Looking ahead, the three nations are scheduled for a third round of talks on July 20 in Mexico City. Discussions are expected to focus on strengthening North American rules of origin, particularly for automobiles and other industrial goods. Mexican Secretary of Economy Marcelo Ebrard expressed optimism about the negotiations, stating, "There isn't any difference I can see that is too substantial for us to not resolve it."

Despite the potential for reaching agreements, Canadian Prime Minister Mark Carney indicated that he does not foresee a resolution being reached in the immediate future, prioritizing an update to the deal rather than rushing into an agreement.

• USMCA drives nearly $2 trillion in annual trade.
• Agreement remains valid for another 10 years.
• Annual reviews to address trade deficits.
• Future negotiations to focus on automotive rules of origin.