Well, not exactly. It would be more appropriate to consider USMCA is on hold. It was widely anticipated that, due to political reasons, the Donald Trump Administration would put a lot of pressure on Mexico and Canada -both highly dependent on US trade-, pertaining the renewal of the trade agreement although its termination is not in the horizon, mainly for three reasons.
First: chain values and economic integration between Mexico and the US on the one hand and Canada and the US on the other are a reality. The cost of interrupting them would be enormous for the three countries, but especially for the US economy. For example, the US is very much dependent on Mexico as its top global trading partner, with annual two-way commerce exceeding $700 billion. It should be added, however, that US reliance is heavily focused on vital manufacturing inputs and supply chain integration, rather than economic survival, making it an asymmetric relationship. Now, integration between the two countries can be exemplified by considering that for every dollar of manufactured goods Mexico sends to the US, about 30 cents of its value comes from American-made parts.
What about Canada? The US relies heavily on Canadian trade, as Canada is one of America's top trading partners. While the US economy is less dependent on Canada than Canada is on the US, trade between the two countries totaled roughly $720 billion in goods. Canada is the main export destination for 26 US states. The US relies on Canadian oil and gas to meet domestic energy needs. The US is heavily dependent on Canadian fossil fuels, with Alberta providing over 85% of all Canadian oil sent to the United States. Canada supplies over 60% of total US crude oil imports, sending about 4 million barrels per day. This makes Alberta’s energy supply to the US roughly ten times larger than Saudi Arabia’s.
Speaking about energy supply of renewable sources, New York relies on Hydro-Québec for about 20% of New York City's power supply. This dependency is rapidly growing as New York shifts away from fossil fuels. However, Québec caps exports during its freezing winters, making the United States both a buyer and seller in this energy relationship. New York and Hydro-Québec have a 25-year contract to supply 1,250 megawatts of renewable power. That is enough electricity to power about one million homes.
The fact that the US maintains a trade deficit both with Mexico and Canada was one of the arguments not to renew the USMCA. But one look at the trade deficit the US has with most economies in the world reveals what everyone knows: that Americans consume more foreign goods and services than the rest of the world buys from US businesses. This is a fact and it is not Mexico’s neither Canada’s fault. Annually, the US runs a goods trade deficit of around $1.2 trillion dollars.
Second: the domestic environment is confronting Republicans “Make America Great Again” (MAGA) followers against Democrats who try to find suitable candidates to come back at the Presidential 2028 elections. Despite Trump’s aggressive deportations and an unpopular war in Iran, the Republican base voters who drive the primaries are continuing to nominate MAGA candidates, not moderates. The USMCA is attached to this context: supporters of Trump want him to “punish” trade partners for whatever reason, so that the rhetoric that recovering the employments the US lost in the past to foreign countries makes sense.
Yet unemployment rates are not responding as intended by Trump’s policies. Experts consider this is happening because his tariffs stoked uncertainty about trade policy, discouraging businesses from hiring and expanding. Secondly, many firms have absorbed tariff costs rather than passing them on to customers, reducing the funds available to pay new employees. Yet there is an area where tariffs have in fact created new jobs: lawsuits against Trump’s policies. Many companies are hiring tariffs experts and once the Supreme Court decided tariffs were illegal, thousands of companies are seeking refunds from the US Government.
Yet Trump follows the rule that suggests “when you are in trouble, blame somebody else.” In this case is Mexico, Canada, and other major trade partners like the PR China and the European Union are the preferred villains of this story.
Third: Trump initiated the USMCA on the grounds that its precursor, the North American Free Trade Agreement (NAFTA) was the “worst trade deal ever” (sic). After renovations, the USMCA was born and it has been six years since its entry into force. It was agreed it would be reviewed after six years with the underlining option of not renewing it. This is the case now which means, after a 10-year period -that is, in 2036- it would cease to exist. But before that, other presidents will enter the picture and in the case of the US, Trump’s successors - who knows? -, may reverse his policies on the USMCA.
Now, the US President has said that he will look for new agreements with Mexico and Canada -on separate basis, OK? This means that new negotiation processes may begin to agree on terms already in place thanks to the USMCA. Why should the US bother to have a new free trade deal when it already has one? It is like buying a new piano because you don’t like the color of the one you already have. It really makes no sense. That does not mean the USMCA does not need reviews or/and updating. Yet Trump has decided not to renew it. Ok then.
There is another casualty in the equation: Mexico-Canada relations. If the USMCA comes to an end, it would be very difficult to bring Mexico and Canada together to negotiate a bilateral trade deal between them. This has to do with the limited trade and investment relations they have compared to the United States, but most of all, due to the prevailing political environment. Thus, Canada is Mexico’s second-largest global trading partner. However, compared to the massive volume of Mexico's trade with the United States (which makes up nearly 80%), Canada represents a much smaller fraction. To Canadians, Mexico is the third-largest single-country trading partner. Bilateral trade reached roughly $62 billion. This relationship is vital for diversifying supply chains, particularly in auto manufacturing, electronics, and agriculture.
Speaking of agriculture, Mexico and Canada have a Seasonal Agricultural Worker Program (SAWP) for farm workers that exists since 1974. Canadian farmers hire Mexican agricultural workers for up to eight months. Employers pay for flights, health insurance and housing for the workers and pay equal salaries that Canadians doing the same jobs. Thousands of Mexican agricultural workers have participated in the program, considered a model that in fact Canada also has with Caribbean countries. That program has continued over the years despite bilateral tensions over the years.
Now, as for integration is concerned, "nearshoring" is a strategy where companies build factories in nearby countries rather than far overseas. Mexico has become a hub for this, allowing North American companies to build things closer to home. Canada relies on this to keep its factories running smoothly. Over 90% of the trade between the two countries moves on the ground by truck or train but they do it by transiting US territory. In a way, trade between Mexico and Canada needs to use American highways. Without a trilateral free trade agreement, Mexico-Canada relations may diminish dramatically -and the US may benefit, collecting tariffs from both countries.
Now, as suggested in previous columns, bilateral linkages are experiencing a hard time dealing with the imposition of visas to Mexican tourists, and several environmental and labor abuses from Canadian mining companies operating in Mexico, among other critical issues.
If USMCA stays the way it is for 10 more years there is the hope it could be revived by a forthcoming US administration when Trump’s term finishes and his successor is less protectionist and nationalist -there is no guarantee this will happen as such, but a more moderate administration may understand the relevance of a more integrated North America when it comes to trade and investment. If Trump decides to start new negotiations with Mexico and Canada on separate basis, this may consume a lot of his trade team’s attention at a time when the Republican veteran has opened so many fronts against so many countries and is also busy with so many geopolitical decisions in the Middle East, Latin America, East Asia and such. His term will end in two years. When the three countries agreed on a negotiation to replace NAFTA and give birth to the USMCA, the consensus on the trade pact was reached on October 1, 2018, and after the ratification of the three countries on March 13, 2020, it came into force on July 1 of the same year. This is to say that trade negotiations take time.
Is it worth the Trump administration initiate a new negotiation process with Mexico and Canada on separate basis that may take the remaining two years of his administration before the implementation of both agreements comes to light? Wouldn’t that create more uncertainty for companies and investors? How would the business climate react to such a process? What would be the risks for the competitiveness of the North American region? Nothing is decided until the midterms. Once they happen, then the destiny of USMCA may become clearer. Or not.
One thing is for certain: a North American gathering between the three leaders does not look probable in the near future and Trump’s bullying against Mexico and Canada may continue at the expense of a much-needed political cooperation process between the three. By the way, the only time the three North American leaders have met was during the FIFA World Cup Draw on December 5, 2025, where they held a 45-minute private meeting. No new trilateral gatherings on the horizon.
Editor’s Note: The above commentary was penned by María Cristina Rosas, professor of politics and social sciences at the National Autonomous University of Mexico in Mexico City. The commentary appears in the RGG Business Journal with the permission of the author.
