FROM THE EDITOR
Six years ago, the United States-Mexico-Canada Agreement (USMCA) replaced the North American Free Trade Agreement as the primary trade framework for the three countries. As called for in the original agreement, the three countries are now discussing whether to renew it, and if so, in what form.
The Trump Administration has indicated that without concessions from Mexico and Canada, the U.S. will not renew the agreement. By July 1, the U.S., Canada and Mexico must agree to continue the deal. If they do, the agreement will be extended by another 16 years. If they don’t, the USMCA will enter annual renewal cycles until it expires in 2036.
If the three countries agree to an extension—with or without resolving pending issues—the pact will be extended until 2032, and negotiations to extend it will again take place.
We think it should be renewed. Overall, the USMCA has been net positive for all three countries, and it has contributed to a dynamic, robust North American economy.
As the Trump administration’s tariffs have reduced trade with China, trade with Mexico and Canada has become comparatively more active, despite also being subject to tariff increases in 2025. That’s because the tariffs on Chinese goods are significantly steeper than the tariffs on Canadian and Mexican imports.
Honda is among several automakers calling for renewal of the USMCA. Photo courtesy Honda Motor Co.
Mexico is the top source of imports into the U.S., with Canada second. Mexico is also the top export market for the U.S., with Canada next. Mexico is the top U.S. trading partner, with total bilateral trade totaling $873 billion in 2025, while Canada follows with $719 billion worth of trade. In 2025, Mexico-U.S. trade represented more than 15 percent of all the goods exported and imported by the U.S., while trade with Canada was nearly 13 percent.
That’s the good news. The bad news is that increased U.S. tariffs on Mexico and Canada have undermined trust of stakeholders in those countries. In particular, the North American automotive industry, which has long been one of the continent’s most important and interconnected industries, is facing challenges from the tariffs, which have led to higher costs, fragmented supply chains, and uncertainty. Mexico’s transportation sector, which is highly integrated with the U.S. transportation industry, represents 40 percent of total trade with the U.S.
How do manufacturers feel about USMCA?
Automakers back the agreement. In April, Bob Nelson, executive vice president of American Honda Motor Co. Inc., spent time in Washington, D.C. lobbying members of Congress and the administration on regional trade and its impact on American manufacturing.
“A single vehicle assembled in the United States represents an extraordinary network of workers, suppliers, and manufacturers. Components move through a highly integrated North American supply chain, often crossing borders multiple times before a finished vehicle ever reaches a customer,” wrote Nelson in an April 17 post on Linked-In. “That system didn’t happen overnight. It was built over decades and strengthened through agreements like USMCA, which provide the certainty our industry needs to invest, hire and innovate here in America. Honda’s deep commitment to localization aligns with the goals of USMCA—last year, 99 percent of the vehicles we sold in America were sourced from North America.”
Over the past six years, the USMCA has increased trade between the U.S., Canada and Mexico. Graph courtesy Brookings Institution
Manufacturers of electrical equipment also support the deal. In April, the National Electrical Manufacturers Association, La Cámara Nacional de Manufacturas Eléctricas, and Electro-Federation Canada—the trade associations representing North America’s electrical manufacturers in the U.S., Mexico and Canada respectively—called upon U.S. trade representative Jamieson Greer, Mexico’s secretary of the economy Marcelo Ebrard, and Canada’s minister responsible for Canada-U.S. trade Dominic LeBlanc to strengthen the USMCA.
In their joint letter, the organizations argue that the USMCA has strengthened regional supply chains and created good-paying jobs in the U.S. and across the continent.
The letter credits the USMCA with helping the continent’s electrical equipment manufacturers “significantly reduce reliance on imports of electrical products from outside of North America.” By one measure, U.S. electrical manufacturers have reduced their collective dependence on materials from China by more than 49 percent since 2018, while investing more than $185 billion in domestic production capacity over the same period.
The associations urge negotiators to advance three key priorities during the upcoming review period:
• Strengthen technical standards harmonization by reinforcing the work of the Council for Harmonization of Electrotechnical Standardization of the Nations of the Americas North American Standards Developing Organizations
• Improve rules-of-origin language
• Eliminate policy uncertainty and potential market fragmentation by preserving the trilateral structure of the USMCA.
What do you think? Should the USMCA be renewed? Share your thoughts with me at sprovierij@bnpmedia.com.
