Trump administration decides to not renew current USMCA, adds to trade policy uncertainty

Today, the Trump administration announced its intent to not renew the US’s trilateral trade pact with Canada and Mexico, known as the USMCA. While the current policy agreement will last another decade, today’s move opens the door to more uncertainty in the trade relationship between the nation’s closest neighbors.

CEI Senior Economist Ryan Young:

“USMCA renewal will likely remain up in the air for the rest of President Trump’s time in office. He believes the uncertainty will give him leverage in other negotiations with Canada and Mexico.

“In the short run, no policies will change. USMCA will remain in effect until at least 2036. That said, Trump has repeatedly violated USMCA with his tariffs and other actions against Mexico and Canada, so it’s not as though USMCA was an effective safeguard against rising trade barriers.

“USMCA has its flaws, but it has provided some stability in trade policy. Lasting stability will have to wait until at least the next administration. In the meantime, Mexico and Canada both have an incentive to strengthen their ties with China and Europe as their alliance with America weakens.”

CEI Vice President for Strategy and Senior Fellow Iain Murray:

“The entire point of trade is to lower costs and increase choice for your domestic consumers while also spurring domestic producers to specialize to mutual advantage. These benefits always outweigh the costs of jobs and industries lost.

“That’s why trade agreements that keep those things happening are better than no trade agreements. USMCA, flawed as it is, is better for Americans than no USMCA. USTR and his counterparts should do their job and ensure the benefits keep flowing. Americans and their pocketbooks will thank them if they do that.”

CEI Finance and Monetary Policy Analyst Steve Swedberg:

“The United States’ decision not to renew the USMCA in its current form underscores a fundamental flaw in the agreement’s design.

“Free trade agreements are meant to expand free trade by creating durable, rules-based expectations that are less vulnerable to recurring political bargaining.

“While USMCA was intended to establish a predictable framework for trade and investment, its review mechanism has instead made core commitments subject to recurring political renegotiation.

“That matters because firms make long-term investment decisions based on the durability of trade rules, not just current trade conditions. When durability becomes conditional on periodic political review, investment horizons shorten even without immediate policy change.

 “At this point, USMCA is functioning less and less like a free trade agreement. This uncertainty does not strengthen North American trade. It only makes trade less free and everyday Americans less prosperous.”