Why will Trump refuse to renew the USMCA, and what does this mean? | | Narrative Articles

The United States has announced that it will not add three more trade agreement destroying $ 1.6 trillion in trade between the US, Mexico and Canada, one day before the agreement began its first official review.

A statement from the US trade representative, Ambassador Jamieson Greer, on Wednesday said that the US does not accept the renewal of the tripartite agreement, also known as the USMCA, “in its current form”.

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“The United States will continue to work with Mexico and Canada to address the weaknesses in the Agreement and the decline in our trade with these countries. However, the Agreement remains in effect pending resolution of these issues or until the Agreement expires,” he said.

It added that the US will meet with Mexico the week of July 20 for the third round of international negotiations on the joint review of the USMCA.

The US decision to re-sign the deal comes as US President Donald Trump has repeatedly said he does not see the need for a trade deal.

In JanuaryTrump said “there’s no real value to it; it’s unnecessary,” adding last month, “I don’t know that I’m going to renew it.”

He also indicated that he is ready to negotiate with Mexico and Canada, saying, “We are talking to them, we will see if we can do something.”

Here’s what we know about the USMCA:

What is the USMCA?

The tripartite agreement came into effect on July 1, 2020, in Trump’s first term, replacing the North American Free Trade Agreement (NAFTA).

According to the US Department of State, the USMCA, created “sustainable, cooperative trade that supports jobs for Americans and grows the North American economy”.

It also included chapters on “Digital Trade, Anticorruption, and Good Regulatory Practices, as well as a chapter on ensuring that Small and Medium Enterprises benefit from the Agreement”.

But the latest decision by the US will now trigger a six-year review of the agreement under the “sunset clause” that Trump negotiated in his first term.

Without an agreement to amend the agreement, the trade agreement will expire on July 1, 2036.

What is Trump’s objection to the deal?

Last month, Trump said about the deal: “We don’t need anything that Canada has. We don’t need anything that Mexico has, but they need everything that we have. And they need to treat us well,” he said.

Before the speech, Greer said more time was needed to address issues with the USMCA, which included a reduction in US trade with Mexico and Canada, to $197bn and $48.3bn respectively in 2025.

For Canada, which is the largest US importer of crude oil, the main decrease was driven by imported oil, while, in Mexico, the decrease increased as companies changed their supply chains from China to Mexico in response to Trump’s tariffs on goods from China. This means that most goods are labeled as being shipped to the US from Mexico.

In addition, a senior official of the Trump administration told Reuters news agency that, despite the imposition of tariffs of 25 percent on Canadian and Mexican industries, 50 percent on steel tariffs, and 10 percent on lumber tariffs, the president still doubts any agreement with the two countries.

What have Mexico and Canada done?

Mexico’s Finance Minister Marcelo Ebrard told a press conference on Wednesday that his country wants to help address US concerns about job losses and trade deficits.

“There is no difference that I can identify between Mexico, the United States and Canada that is so great that we cannot solve it,” said Ebrard, who joined the meeting with Greer and Dominic LeBlanc, the Canadian minister in charge of US-Canada trade.

“We cannot allow our (automobile) industry to be at risk,” Ebrard said, adding, “I would say that this has been the main point of discussion with the United States in all these negotiations: to protect our auto industry.”

LeBlanc also said Canada will continue to counter Trump’s tariffs on steel, aluminum, autos and lumber.

“We agreed on the importance of continuing our dialogue and identifying ways to ensure that trade and economic relations between Canada, the United States and Mexico continue to support North American development and competitiveness,” he said.

What happened?

With both Canada and Mexico open to continuing negotiations to resolve issues related to the USMCA agreement, which will last until 2036, for now, things will be business as usual.

Trump could use tariffs to force negotiations.

Alternatively, bilateral cooperation may be more important than tripartite cooperation; however, they could not match the trading power and volumes under the USMCA.