What are the challenges of the Trump administration in trade negotiations with Canada and Mexico?
Former President Donald Trump formally decides not to renew the USMCA trade agreement, triggering a sunset clause. US President Edward Lawrence confirms that Trump will pursue individual agreements with Mexico and Canada for 10 years.
The Trump administration's announcement that they do not plan to renew the US-Mexico-Canada Agreement (USMCA) and instead intend to make individual trade agreements with their two neighbors.
Wednesday marked the sixth year of the USMCA being in effect, a milestone that gave the administration the opportunity to extend the agreement as is or choose not to renew it to address trade issues with Canada and Mexico. The USMCA will last 10 years while those negotiations take place.
Trade relations with Canada and Mexico are of great importance to American businesses and consumers, as those countries are the two largest export markets for US-made goods and two-thirds of the largest sources of imported goods.
While the USMCA helped modernize US trade relations with its two neighbors, the official said the trade deal did not adequately manage the trade deficit and added that it also failed to expand “market access opportunities for Canada and Mexico,” citing issues such as Canada's dairy restrictions and Mexico's threats against US corn and corn products.
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The US plans to pursue bilateral trade agreements with Canada and Mexico after choosing not to renew the USMCA. (REUTERS/Rebecca Cook/File Photo)
Instead of looking at extending the USMCA, which the president negotiated during his first term, the official signaled that the US may end up with bilateral trade agreements instead.
“I saw a world where we have an agreement with Mexico or an agreement with Canada, in the time of President Trump,” said the official. “I think that is possible if those agreements or those agreements are really intended and have the effect of reducing our deficit with those countries.”
The official added that the president “remains hesitant” to conclude some kind of deal that would reform the USMCA and keep the trilateral trade agreement intact, though he stressed that it is in the interest of all countries to continue negotiations.
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Rules of origin will be a point of emphasis in the US negotiations with Canada and Mexico. (Emily Elconin/Bloomberg via Getty Images)
US trade negotiators are expected to meet with their Mexican counterparts on July 20 and the official said they expect to discuss issues including labor responsibilities, the environment and water quality, and intellectual property in an effort to make further progress on those topics.
“We have already discussed some details with Mexico about strengthening the rules of origin agreement, about improving economic security compatibility and resolving bilateral issues,” a senior Trump administration official told reporters in a call announcing the move.
“You know, Mexico, although we have many challenges in our relationship, including trade, they understand the administration's tax policies,” explained the official. “In many ways, they have been constructive on this, they have made proposals about reducing the deficit. So we have been negotiating with them officially to deal with solving many bilateral problems.”
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President Donald Trump is reluctant to renew the USMCA three times. (Tasos Katopodis/Getty Images)
The official added that “Canada is in a different situation” after it imposed retaliatory tariffs on the US following the president's move to impose tariffs on Canadian goods.
“Along with the People's Republic of China, Canada is one of the only countries in the world to retaliate against America following the president's record-breaking trade actions to eliminate the trade deficit and coastal production here,” said the official. “And they haven't had to deal with as many of the non-tariff issues and trade challenges that they've had in years past.”
According to the official, the US decision not to renew the agreement and enter a 10-year review phase does not mean that negotiations should take that long – although they added that President Trump could withdraw from the agreement before that review time limit expires.
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“The reality is, if Canada or Mexico fully fits into what's needed, that's a different situation,” the official said. “At the same time, the president also reserves his contractual and legal right to withdraw from the agreement, before 10 years.”
