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The Trump administration made a significant move on trade this summer — one that deserves more attention than it has received.
On July 1st, the United States formally declined to renew the US-Mexico-Canada Agreement in its current form. The USMCA, which underpins roughly two trillion dollars in annual trade across North America, was due for a mandatory six-year review. A unanimous agreement to renew would have extended the deal automatically until 2042. Instead, the Trump administration said no — choosing not to rubber stamp a renewal without addressing existing issues first.
What does this mean, you may ask? The USMCA is not cancelled. It remains fully in force through July 2036. Current trade flows, preferential tariffs, and rules of origin continue unchanged for now. What the non-renewal does is trigger annual reviews — giving the United States leverage to demand improvements every single year rather than locking in a deal the administration believes has fallen short of its promises. And fallen short, many conservatives argue, it has. Trump negotiated the original USMCA to replace NAFTA, and he was right to do so. But the results have not matched the promise.
Since the USMCA took effect in 2020, the U.S. goods trade deficit with both Mexico and Canada have skyrocketed. American manufacturing employment has not recovered, and the share of the economy represented by manufacturing has actually declined.
The administration has many concerns that are well-founded. Not only growing the growing trade deficits, but also a loophole allowing Chinese goods to be transshipped through Mexico to evade U.S. tariffs, and insufficient domestic content requirements for automobiles. American steel and iron manufacturers have welcomed the move, arguing that annual reviews give U.S. negotiators the leverage they need to fix these problems.
One telling signal is the lack of pushback from Congressional Republicans. One Republican congressman put it plainly: he supports the USMCA but cannot support blindly renewing it without fixing how Canada treats American dairy farmers and fruit and vegetable producers.
Despite the headlines you may have heard from either side of the reporting the facts are: The deal stays in place, the negotiating position improves, and this is smart leverage, not reckless disruption.
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