Canada abandons USMCA talks as domestic economy slumps | International Business News

The administration of the President of the United States Donald Trump wants to increase the number of cars produced in the North American regions to be able to receive special treatment under US-Mexico-Canada Agreement (USMCA) on sales up to 82 percent, with 50 percent of that value made in the US.

The new proposal, first reported by Reuters, citing four unnamed sources familiar with the matter, emerged amid USMCA reform talks in Mexico City. Canada was not present at the talks.

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The amendment, if approved, would be a major break from the current USMCA, which requires that 40 percent of the “major components” of North American passenger vehicles be manufactured in high-wage regions, effectively the US or Canada.

That rate is now 45 percent for pickup trucks. Overall, vehicles built in North America currently must have 75 percent of components to qualify for special treatment under the USMCA.

Auto sector officials told the site that US Trade Representative Jamieson Greer will negotiate with Mexico and give Canada a take-it-or-leave-it decision.

Canada’s withdrawal from the USMCA negotiations, which are due to be reviewed in July, comes amid tensions between Washington, DC and Ottawa.

The USMCA, which was established in 2020 to replace the North American Free Trade Agreement, has maintained a free trade zone that supports approximately $1.6 trillion in three-year trade. But Trump last year imposed tariffs of 25 percent on Canadian and Mexican autos and their components, and 50 percent duties on steel, aluminum and copper from those countries.

Greer has said he wants to keep some of the tariffs on Mexico and Canada in a revised trade deal. But these two friends can get expensive prices. Currently, cars from Japan, South Korea, the European Union and the United Kingdom can be imported at a lower price than Canada or Mexico.

Economic changes

The Canadian economy performed better in the first quarter compared to last year, which fell in the second quarter due to tax-driven uncertainty.

Canada’s gross domestic product (GDP) shrank, unexpectedly, at an annual rate of 0.1 per cent in the first quarter, Statistics Canada said Friday, compared with a 1 per cent contraction in the fourth quarter of last year. However, on a quarterly basis, the first quarter of GDP was unchanged from the decline in the fourth quarter of last year.

“Our forecast for growth to increase in H2 to 2027 depends on a successful renegotiation of the USMCA, an end to the Middle East conflict, and the resumption of normal trade through the Strait of Hormuz,” said Tony Stillo, director of Canadian economics at Oxford Economics, in a statement, adding that “the economy is improving.”

Canada’s economy has been hit by, among other things, Trump’s tariffs, which have threatened to annex the country and make it the 51st country in the US. Prime Minister Mark Carney was elected on a platform to strengthen and diversify Canada’s economy away from the US.

As part of those efforts, Canada is in the midst of strengthening economic ties with Chinahis second biggest business partner and his relationships were on hold for years until recently.

Chinese Foreign Minister Wang Yi, in a meeting with Canada’s Minister of Foreign Affairs, Anita Anand on Friday, said that Canada can exceed its goal of increasing exports to China by 50 percent by 2030.

Wang is on a three-day visit to Canada, marking the first visit by a Chinese foreign minister in a decade. He thought that Canadian exports to China could increase by 100 percent, increasing the power between the countries.

Canada and China signed the first agreement in January to lower prices for electric vehicles.

“Canada is focused on expanding our economy and disrupting our trade relations,” Anand said at the conference.

Canada continues to push for a stronger relationship with the US despite tensions.

On Thursday, speaking at the Economic Club of New York, Carney called for a new deal with the US when the two countries decide to renew the deal.

Carney says there needs to be a “real deal” that also considers cooperation in the private sector that is increasingly challenged by global competition. He warned that, “We live in a world where integration has weapons,” and he said that is why Canada is different from the US and signing trade agreements with countries around the world.

“Our main goal in these relationships is to increase independence. Because we live in a world where integration has been weaponized. Because a country that cannot feed, fuel or defend itself is not independent,” said Carney.