Six years ago, Donald Trump stood in the White House celebrating the USMCA as the “fairest, most balanced, and beneficial trade agreement we have ever signed into law.” On Wednesday, his administration allowed the deadline to renew that same agreement to pass without a signature, leaving the future of the trade deal he once praised hanging in uncertainty.
U.S. Trade Representative Jamieson Greer was handed the task of making this sound orderly on Wednesday, and he gave it his best effort.
“The United States did not agree to renew the USMCA in its current form,” he said. “As a result, the USMCA is not renewed.” The agreement technically remains in force until 2036, but the decision opens the door to years of negotiations that suddenly look far less predictable.
The administration’s message has hardly been consistent.
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In January, Trump dismissed the agreement as “irrelevant.” By June, he was telling reporters, “I don’t know that I’m going to renew it,” before adding: “We don’t need anything that Canada has. We don’t need anything that Mexico has, but they need everything that we have. And they have to treat us better.” A week later, during a visit to Paris, he softened his position somewhat. “I would rather not have the agreement, but I may sign it.”
Businesses are paying close attention because uncertainty is expensive.
Patrick Childress, co-lead of Holland and Knight’s USMCA team, said companies simply do not know what comes next.
“We have these ongoing negotiations and we don’t know exactly when they will end, and there’s no short or medium-term forcing function for those negotiations to end. So that creates, of course, some uncertainty for companies.”
Retailers share the same concern.
RILA’s director of government affairs Ellen Jackson warned that “USMCA provides the certainty retailers need to plan supply chains, invest in North America, and keep goods moving efficiently for consumers.”
For shoppers, however, the question is much simpler. What happens to grocery prices?
According to the USDA, Mexico supplies roughly 69% of America’s fresh vegetable imports and 51% of its fresh fruit imports by value. Any disruption to that trade relationship eventually reaches the checkout line.
Chad Bown, former Chief Economist at the U.S. Department of State, broke it down simply. “If you start to see tariffs between the United States, Canada and Mexico on farm products, that’s going to make groceries more expensive. Whether we’re talking about avocados from Mexico or strawberries or tomatoes, just having integrated markets for cattle like we’ve had historically.”
He added another warning that reaches well beyond produce. “It’s less expensive if all three countries are doing it together. It’s really, really expensive if they’re doing it independently.”
The same logic applies to the auto industry.
Vehicle parts routinely cross the borders of the United States, Mexico, and Canada several times before a finished car rolls off the assembly line, a system that has taken decades to build and would be costly to disrupt.
Tony Stillo, director of Canada Economics at Oxford Economics, said annual reviews create exactly the kind of uncertainty businesses try to avoid. “We may get mandatory annual reviews, but that also means that uncertainty prevails, and that’s a negative for decision-making for businesses. It’s a definite dampener, for sure.”
Featured image via Political Tribune Gallery
