As President Donald Trump accelerates his tariff threats against vital trading partners Canada and Mexico, a potential renegotiation of the trilateral trade agreement may be on the horizon.
During his first term, Trump advocated for the replacement of the North American Free Trade Agreement with the new United States-Mexico-Canada Agreement, commonly referred to as USMCA.
Under Trump’s administration, a new clause, Article 34.7, was introduced, mandating a joint review of the agreement within six years, with the deadline set for July 1, 2026.
The agreement also contains a sunset provision that could invalidate the pact by 2036 if it is not renewed, alongside a required consultation with American stakeholders set to commence in October.
While specifics regarding this review are sparse, experts believe that Trump is inclined to entirely rewrite the agreement. Vina Nadjibulla, vice president of research and strategy at the Asia Pacific Foundation of Canada, remarked,
“President Trump’s tariff threats and coercive rhetoric aimed at Canada have led many to conclude that he is seeking a complete renegotiation of the USMCA well before the expected dates of July 2026 or even October,” Nadjibulla conveyed to Al Jazeera.
The Trump administration is aiming to overhaul various trade regulations to secure concessions from other nations, enhance domestic manufacturing, and boost governmental revenues.
Trump’s threats have generated significant anxiety in Canada and Mexico, who now face the likelihood of three rounds of tariffs.
After proposing 25 percent blanket tariffs on the neighboring nations due to their perceived inability to control drug trafficking and unauthorized migration across US borders—actions that have since been postponed until March 4—Trump this week revealed plans for reciprocal tariffs on countries imposing taxes on US goods as well as tariffs on all steel and aluminum imports.
“Negotiating the USMCA could potentially address a broad spectrum of issues, including steel and aluminum tariffs, but it will not be a straightforward process,” explained Rachel Ziemba, an economist at the Center for a New American Security who specializes in geopolitical and macroeconomic risks, to Al Jazeera.
According to economist Stephen Brown, Trump’s goal will be to secure more favorable terms for American businesses. Brown, deputy chief for North America at Capital Economics, anticipates several significant modifications to the USMCA, particularly regarding the “rules of origin.”
At present, to benefit from duty-free trade under the USMCA, the agreement requires that 75 percent of a vehicle’s components must be produced in North America. In a renegotiated version, that percentage might be increased or restructured to omit components made in specific countries, such as China.
Brown also predicts that the US will implement similar stipulations for high-tech sectors like aerospace, and the USMCA review is expected to advocate for a greater market share for American firms.
According to Brown, Mexico and Canada still impose restrictions on market access for US companies in various sectors, including agriculture, banking, and telecommunications.
The US likely aims to ease these limitations, he noted.
Fork in the Road
A critical question is how Canada and Mexico will proceed.
Will they intensify their trade relations with the US, or will concerns about potential compromises to their sovereignty encourage them to diversify away from American trade?
“Canada and Mexico find themselves on the front lines of navigating Trump’s new trade war. Initially, China was expected to bear this weight, but that has shifted. Trump has not made distinctions between allies and adversaries,” Nadjibulla stated, adding that China is likely to increasingly influence the agenda beyond trade due to matters such as the legal status of TikTok and the ongoing war in Ukraine.
While some Canadian analysts express hope that revisiting the USMCA may mitigate other tariff threats, Ziemba cautions that this outcome is far from guaranteed.
“Ultimately, Trump could be influenced by adverse market signals and pressures from American businesses, including manufacturers and construction sectors, who are likely to face increased expenses,” she noted.
Currently, the threats from across the border are sparking a movement in Canada to “buy Canadian” and reduce dependence on the US market.
However, Nadjibulla warns that this pursuit of independence comes with economic repercussions, suggesting that Ottawa will soon encounter “that fork in the road.”
