U.S. President Donald Trump said the United States may either let the Canada-United States-Mexico Agreement (CUSMA) expire next year or negotiate a new deal.
The deal, which he was instrumental in negotiating in 2018 and is referred to as CUSMA in Canada and USMCA in the United States, is up for review next year.
“It expires in about a year, and we’ll either let it expire, or we’ll maybe work out another deal with Mexico and Canada,” Trump told reporters in the White House on Wednesday, when asked about the future of the deal.
Canada and Mexico had “taken advantage” of the U.S., Trump said.
“Mexico and Canada have taken advantage of the United States. It’s like just about every other country, in all fairness, it’s not them. I’m not blaming them. But every country because we had stupid people running our country,” Trump said.
The deal was signed during Trump’s first term in office and in 2020. After signing the deal, he praised the trade agreement.
“It’s the best agreement we’ve ever made,” Trump had said at the time.
Trump and members of his administration have since criticized aspects of CUSMA, including Canada’s supply management system and import quotas for auto manufacturing between all three countries. Those rules have been exploited by China to enter the North American auto market through Mexico at lower tariff rates, according to the U.S. and Canadian governments.
U.S. Trade Representative Jamieson Greer told Politico this week that Trump could either walk away from the deal or negotiate separate deals with both Canada and Mexico.
“I mean, that’s always a scenario,” Greer said in an interview on Politico’s podcast, The Conversation.
Get breaking National news
For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen.
“The president’s view is he only wants deals that are a good deal. The reason why we built a review period into USMCA was in case we needed to revise it, review it or exit it,” he added.
Under Article 34.7 of CUSMA, during the review, all three countries will have to agree on whether to extend the agreement for another 16 years, with a new joint review set no later than in six years’ time.
If one country does not agree to the 16-year extension, then joint reviews will have to be held every year until a longer extension can be agreed to.
Article 34.6 of CUSMA states that any country can withdraw from the agreement at any time by providing written notice to the other parties, with the withdrawal taking effect six months later.
“If a party withdraws, this agreement shall remain in force for the remaining parties,” the text reads.
Trump is also considering splitting the free trade agreement into two parts — one for Canada and one for Mexico, Greer said.
“Our relationship with the Canadian economy is totally different than our relationship with the Mexican economy,” Politico’s daily politics newsletter Canada Playbook quoted Greer as saying.
“I mean, the labor situation is different. The stuff that’s being made is different. The export and import profile is different. It actually doesn’t make a ton of economic sense why we would marry those three together,” Greer said.
The office of the U.S. Trade Representative (USTR) is currently holding public hearings on its formal review of CUSMA, which began Wednesday and will conclude on Friday. The USTR will hear from business groups from both nations.
Canada launched its own formal review of the deal in September.
Industry Minister Melanie Joly did not address Trump’s comments or face questions about them when she appeared Thursday afternoon at the House of Commons international trade committee, which is conducting a study on the forthcoming CUSMA review.
However, she noted that “the American president and the American administration is very unpredictable,” and that the government was focused on protecting and growing Canadian jobs and critical industries.
“In the medium term we need to make sure that industries can adapt and pivot,” she said. “They need to be able to seek out new markets and they need to be able to develop new products.
“For CUSMA, our goal will have to be to continue to have access to the American market and the Mexican market, knowing that we have some sectors that are targeted by tariffs that are unjustified, and we have to look after that.”
Joly noted she is not on the CUSMA negotiating team for Canada, which she said is being led by Prime Minister Mark Carney alongside Canada-U.S. Trade Minister Dominic LeBlanc.
LeBlanc on Thursday concluded a visit to Mexico to discuss trade and economic opportunities, which Ottawa has been seeking to strengthen in the face of the U.S. trade war.
Canada is the largest export market for the U.S. and makes up one of the smallest trade deficits of any of the U.S.’s trade partners. In fact, without energy exports, Canada runs a deficit with the U.S.
Since March, the U.S. has provided tariff relief for Canadian exports that are compliant with CUSMA. A recent RBC report pointed out that the CUSMA exemptions have been critical in cushioning not only the Canadian economy, but also U.S. manufacturers and importers against the worst impacts of Trump’s tariffs.
If Trump withdraws the U.S. from CUSMA, economists say Canada and Mexico would immediately face higher tariffs on all goods imported to the U.S.
—With files from Global’s Sean Boynton
Leave a Reply