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Donald Trump is about to arrive to the White House for his second term and no doubt the effects of his forthcoming presidency are being felt all over the world.
Trump is unpredictable with an appetite for populism. With isolationist and nationalist approaches, Trump anticipates the rise of protectionism and the use of economic and trade sanctions to advance his domestic agenda.
The U.S.’s neighbors, that is, Mexico and Canada, are challenged with specific issues such as fentanyl trafficking and production; drug lords; undocumented migration, and, of course, trade and investment. The fact that the United States-Mexico-Canada (USMCA) free trade agreement will face its first review in 2026, has attracted a lot of attention in the three countries and not only due to Trump’s threats of 25% tariffs. Ontario Premier Doug Ford has suggested expelling Mexico from the USMCA returning to the original 1989 Canada-US free trade agreement. The reason for making such a proposal is that, according to him, Mexico is letting China products into the US and Canadian markets, thus abusing the preferential provisions of USMCA. Ford also considered “insulting” the comparison between Mexico and Canada made by Trump when suggesting tariffs increases against both countries.
Yes, Mexico-Canada relations are not in a good mood. At the beginning of 2024, Canada reinstalled visa requirements for Mexican tourists by the same Trudeau administration that decided to eliminate them back in 2016. At that time, Trudeau wanted to assure the success of the North American Leaders Summit which he hosted in Ottawa, since then-President Enrique Peña Nieto warned that were the visa requirements for Mexican tourists prevailed, he would not attend the meeting. More recently, Canada has criticized the foreign investment policies of the Mexican López Obrador administration (2018-2024) and specially the reversal of the energy reform that favors national over foreign investors. Also, Canada is a major investor in the mining sector in Mexico and has been challenged due to the situation of workers, their labor and union rights and environmental concerns.
That said, Canada has always considered Mexico an “intruder” in the Canadian-American agenda. It “distracts” Washington from its once considered most strategic ally and trade partner. Indeed it was a tradition, after the American President’s inauguration, that the incumbent visited Canada as its first international trip. George W. Bush changed that “tradition” by visiting Vicente Fox’s home as its first international trip. Canada was concerned. But Trump went even farther by making his first international visit to Saudi Arabia. Where will it be his first foreign travel after January 20, 2025?
Trump’s threats of tariffs have prompted a political crisis in Canada, where the popularity of Justin Trudeau and the liberals already faced record lows. According to the polls, were the federal elections held today, the conservatives would obtain around 43% of the votes against 20% for the liberals. The Canadian electoral system has established next October 2025 as the limit to have the elections, but it is almost sure that they may take place sometime soon. The political crisis in Canada has led Trudeau’s once right hand, Chrystia Freeland, to resign, a move that has prompted the opposition to call for an earlier federal election.
In Mexico, the new administration chaired by Claudia Sheinbaum has resisted the anti-Mexican rhetoric of Trump. For instance, she approved tariffs against Chinese textiles and products imported from Shein and Temu. The 35% textiles tariffs plus the 19% to the products sold by Temu, Shein and even Amazon are intended to diminish the American and Canadian rhetoric of Mexico abusing USMCA for the benefit of the Asian giant. President Sheinbaum has insisted that there is a constructive dialogue with the US authorities and Trump, although contrary to the visit paid by Trudeau to the republican a few weeks ago, Sheinbaum has not yet met him in person. Sheinbaum and Trump have exchanged letters and phone calls. Trump has already announced that he picked Ron Johnson as forthcoming US Ambassador to Mexico. Johnson was US Ambassador to El Salvador, has military and intelligence experience in fighting drug trafficking and migration and is considered a hawk in political circles. It sends the message that Trump is serious about organized crime and undocumented migration. Contrary to that, Canada designated a very experienced Foreign Service official, Cameron McCay, as the new Ambassador to Mexico. Last December 19, he quietly met with the Mexican chief of protocol in Mexico saying that he intends to strengthen relations between Canada and Mexico.
Yet, despite these diplomatic changes, President Sheinbaum has said that Mexican Ambassadors to the US and Canada will remain in Washington and Ottawa. Thus, neither Esteban Moctezuma Barragan, current Mexican Ambassador to the US, nor Joaquin González, current Ambassador to Canada, will face new assignments somewhere else. Both were appointed by the former administration of López Obrador.
Thus, the three North American countries have faced – or are about to – the change of their respective officials, cabinet members and possible strategies and scenarios. Mexico leads the way with the inauguration of the first female, Claudia Sheinbaum, last October 1st. Then comes the US where after the November 5th elections, Donald Trump won in the presidential race against Kamala Harris. Soon Canada will also face federal elections with the possible return of the conservatives led by Pierre Poilievre. It is not clear at this point whether the three North American leaders will get together on the occasion of a much-needed North American Summit. During the first presidency of Trump, no North American Leaders Summit was held. Trump favored bilateral over trilateral relations, which distanced even more Mexico and Canada.
USMCA
Speaking about the USMCA, as it is well known, there is a provision providing for a joint review process through which all three parties confirm to continue the agreement, the first time such a provision has been included in a U.S. trade agreement. The now extinct North American Free Trade Agreement (NAFTA) did not have any provision like that. The first joint USMCA review is scheduled for July 1, 2026. If the three countries do not agree to extend USMCA in the 2026 review, the agreement will terminate in 2036. If any party does not agree to extend USMCA, the parties will conduct annual joint reviews until all parties agree to extend the agreement for another 16-year period (after which the parties will return to a six-year joint review cycle) or USMCA terminates. This review provision was Trump’s idea and for this reason it is important that the review will take place precisely under Trump’s second term.
Why is a USMCA review needed? The idea is to guarantee its functionality; thus, the text may face some changes say to improve the rules of origin or the inclusion of emerging topics such as the role of Artificial Intelligence. In any case, the time schedule is as follows: next October 2025, in the US, is the Federal Register notice date for public comment and public hearing date on whether the United States should extend the pact. As suggested before, this is the time limit to have federal elections in Canada. Thus, Ottawa may be under pressure to go to the polls early in 2025 so that the new conservative government is better prepared for the USMCA review process.
By January 2026, the US Trade Representative will report to Congress on issues considered relevant to the United States during the Joint Review Process. Mexico and Canada may pay a lot of attention to this, since the US may want to make its trade priorities prevail. Then, on July 1st the review process will begin. What are the major topics of concern under the review process?
First comes motor vehicles provisions. USMCA created specific rules of origin and labor conditions. New motor vehicles require 75% of North American content. Wage requirement states that 40%-45% of auto content be made by workers earning at least $16 an hour to avoid social dumping specially by Mexico. Also it was ruled that 70% of a vehicle’s steel and aluminum must originate in North America; and for steel to be melted and poured in North America. To this one may add the presence of Chinese vehicles in North America and specially in Mexico. During the presidential debate with Kamala Harris, Trump expressed concerned about Chinese vehicles in Mexico and its presence in the North American market.
Second comes dairy, a specific agenda between Canada and the US. Under USMCA the US has increased its access to the Canadian market for dairy products, although Canada retains restrictions under its supply management system that Washington may want to eliminate. American products that increased its participation in the Canadian market include milk, cheese, cream, skim milk powder, condensed milk, yogurt, and several other dairy categories. In return, the United States expanded import quota levels for Canadian dairy and sugar products. Yet this will be a very contentious issue during the review process between the two countries.
Third, the dispute settlement mechanism may be contested. The new USMCA agreement maintains the NAFTA state-to-state mechanism for most disputes arising under the agreement and retains the binational dispute settlement mechanism to review trade remedy disputes. Mexico maintains the investors-state dispute settlement for government contracts in the oil, natural gas, power generation, infrastructure, and telecommunications sectors, and in other sectors if national remedies are exhausted first. Controversies over the energy sector may be again on the spot. As it is well known, in 2022, the United States and Canada launched USMCA disputes against Mexico and are in state-to-state consultations over policies by Mexico’s then president López Obrador to undo some of the 2013 market-opening energy reforms. It does not seem the new Mexican president will reverse those provisions, although Sheinbaum has stated foreign investment may be allowed in the energy sector under specific circumstances.
Fourth, Mexico genetically modified Corn Ban Dispute just ended in win for American Corn exporters. A dispute panel has ruled that Mexico violated its commitments under the USMCA when President Manuel Lopez Obrador signed a decree banning genetically modified corn imports in 2023. One may expect more trade controversies on other areas as long as the very strong winds of protectionism blow.
Fifth, speaking about labor and environmental issues, the USMCA clearly states that parties need to adopt, maintain, enforce, and not derogate from statutes and regulations that relate to the International Labor Organization Declaration on Principles/Rights at Work. Also, they agreed on adoption, enforcing and no derogation from environmental laws, including seven multilateral environment agreements. Although environmental concerns may turn more difficult to address under Trump, so far it is labor with a new “rapid response” enforcement mechanism for worker rights complaints at covered facilities, that enhanced provisions on anti-worker violence, and a ban on imports made by forced labor. US authorities have pursued several rapid response labor complaints to protect worker rights at certain facilities in Mexico.
Sixth, Intellectual Property Rights under USMCA retain NAFTA’s core protections for copyrights, patents, exclusivity periods for test data, trade secrets, trademarks, and geographical indications, as well as specific enforcement requirements. The revised USMCA removes provisions on biologic regulatory exclusivity, among other changes. Key USMCA provisions include copyright term extended to 70 years; criminal and civil penalties for trade secret theft, including by state-owned enterprises, and cyber-theft; prohibitions on circumvention of technological protection measures; and copyright safe-harbor for internet service providers.
Seventh – and speaking about the use of the internet -, USMCA includes provisions on digital trade that were incorporated in free trade agreements after NAFTA, such as prohibiting customs duties on electronically transmitted products and protecting cross-border data flows. The USMCA digital trade chapter also includes more advanced provisions that prohibit data localization policies and limit source code disclosure requirements. When NAFTA came into force, e-commerce, data flows and data localization were developing, but today they are a critical area that calls for clear rules to address data theft, destruction and other illicit activities that may harm international and intraregional trade relations.
Trump’s threats of tariffs, and a trade war between the US and China – already set in motion -, may need a very profound analysis and work by legislators, business communities, and trade experts to avoid measures that may in fact harm USMCA and North American relations at a time when cooperation is much-needed, probably more than ever.
Editor’s Note: The above guest column was penned by María Cristina Rosas, a professor and researcher in the faculty of political and social sciences at the National Autonomous University of Mexico in Mexico City. The column appears in The Rio Grande Guardian International News Service with the permission of the author. Rosas can be reached via email at: mcrosas@prodigy.net.mx
The post Rosas: The future of USMCA and North American relations appeared first on Rio Grande Guardian.
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