Scott Lincicome and Chad Smitson
Today (July 1) marks the official deadline for renewing the United States-Mexico-Canada Agreement — and the US is expected to miss it. As I argued in my latest Bloomberg column, the missed deadline won’t be entirely costless but also won’t be as consequential as many headlines suggest.
For starters, a missed deadline today simply means the deal will revert to annual reviews until it’s either extended for 16 more years or expires in 2036—ten years away. This will inject uncertainty into North American supply chains, likely hampering investment on the margins. But in terms of day-to-day trade among the three nations, it’ll be unnoticeable.
Trump could, of course, try to withdraw from the deal—any party can for any reason, with six months’ notice—and he’s threatened as much. But, as I explain in my column, it’s a safe bet he’s bluffing.
First, there are the economics. USMCA undergirded $1.99 trillion in trilateral goods and services trade in 2024 alone, and the integration of North American supply chains dwarfs that of comparable trade blocs:
This integration is particularly deep for US-based multinational manufacturers, but it’s also important for food and other agricultural products, services, digital trade, and investment. Eliminating the relatively seamless trade USMCA allows would inflict serious, self-imposed damage on US manufacturers, energy producers, farmers, and the economy more broadly.
The president knows this. That’s why, for all Trump’s bluster, he’s quietly offered USMCA-related exemptions for virtually every major tariff action he’s taken—exemptions that US importers have seized upon (see Figure 2).
There are also political and legal impediments to US withdrawal—and to fundamentally altering the deal in the current trilateral negotiations. Thus, we should expect lots of USMCA theater and a handful of marginal changes in the coming months, but not termination or even a major overhaul of the current agreement.
To learn more, check out my full Bloomberg column and our recent USMCA event with House Ways & Means Chair Adrian Smith.