President Donald Trump signs the US-Mexico-Canada Agreement (USMCA) into law outside the White House in January 2020. Trump, who initially praised the agreement, appears to have soured on it. (The White House/Shealah Craighead)
Why Is Trump Thinking About Ditching His Own Trade Deal?
In 2019, Trump described the US-Mexico-Canada Agreement (USMCA) as the “best and most important trade deal ever made.” He has since changed his mind.
President Donald Trump recently made an offhand remark that the United States could “do better as a country” without the United States-Mexico-Canada Agreement (USMCA), and added he would “rather not have it”—leading to panic in Washington, Ottawa, and Mexico City and feverish speculation about the White House’s next move on trade. The trilateral free trade pact, meant to bind the economies of North America together, was actually enacted just over six years ago during Trump’s first term; it was similar in many ways to the North American Free Trade Agreement (NAFTA), in effect from 1994 to 2020.
Trump, who consistently and vehemently opposed NAFTA long before he first aspired to political office, famously characterized it as “the worst trade deal maybe ever signed anywhere” during his first campaign for the presidency in 2016. Trump claimed that the pact had devastated American manufacturing and led to the loss of millions of jobs to Mexico.
NAFTA, which took effect on January 1, 1994, aimed to eliminate tariffs on thousands of goods produced in North America. Its consequences continue to be debated; the general consensus is that it hurt low-end US jobs by opening the American economy to competition from Mexico, but also lowered prices for consumers and helped other industries dependent on complicated multinational supply chains such as car manufacturing.
Trump made replacing NAFTA a major part of his first administration, and touted the negotiation of the USMCA as a significant improvement.
“It will be the best and most important trade deal ever made by the USA,” the president wrote on X (then known as Twitter) in December 2019. He claimed that the agreement would be “good for everybody,” including unions, manufacturers, and the agricultural sector.
Why Did Trump Change His Mind About the USMCA?
Trump, who is rarely consistent on most policies that don’t directly benefit him or his family, praised USMCA as a historic win for American workers, farmers, and industries at the time of its negotiation in 2018. His stance has since shifted.
“I would rather not have the agreement, but I may sign it,” Trump told reporters in France during a meeting of the G7 this week. “We do better as a country if we don’t have an agreement.”
All three countries need to approve the renewal of USMCA by July 1, or it will signal that they could leave the pact. In the latter case, the withdrawal is not trivial; it could take up to 10 years for the United States to leave the pact, meaning that a future administration could easily reverse it. The USMCA will remain in place during exit negotiations.
Moreover, the US government must give six months’ notice to Mexico City and Ottawa of its intentions. Trump has not formally triggered the six-month “wind-down” process, which he could have done at the start of the year.
American Industry Mostly Supports the USMCA
Canada and Mexico have made clear that they favor an extension, even as Trump is opposed. So does much of the American manufacturing sector—particularly the automotive industry, which, as previously noted, sources many basic components from factories in Mexico.
“Mexico and the United States seem to understand that North American auto manufacturing and trade is currently at a competitive disadvantage to other automotive-producing countries that have agreements on Reciprocal Trade, and that the USMCA review and renewal is an opportunity to address this,” Matt Blunt, who heads a group representing General Motors, Ford Motor and Stellantis, told Reuters on Wednesday.
The agricultural sector is also calling for an extension of USMCA for another 16 years, as it would preserve tariff-free access for nearly all agricultural products across North America. According to the Brookings Institution, USMCA accounts for more than $60 billion in annual agricultural trade.
Trump Is Mad the USMCA Didn’t Improve the Trade Deficit
The US president’s newfound opposition to the USMCA seems to stem from the fact that it has shielded Canada and Mexico from the bulk of Trump’s blanket import tariffs. Under the terms of the agreement, certain classes of goods are exempted from tariffs, and these goods make up most of America’s bilateral trade with Canada and Mexico.
The United States continues to run a significant trade deficit with both countries—particularly with Mexico, which exported nearly $200 billion more in goods and services to the United States than it received in return.
Even as both those nations import nearly one-third of total exported US goods—accounting for more than the next dozen US trading partners combined—the president may be too focused on what he views as a trade imbalance.
Trump has long viewed trade deficits as a sign that the United States is being exploited by other nations, and the core of his “America first” economic policy has been a fixation on eliminating them via tariffs or renegotiated trade agreements. Economists are much more ambivalent about the prospect of trade deficits, arguing that they are inevitable in many cases and can confer some advantages on the net importer.
About the Author: Peter Suciu
Peter Suciu has contributed to dozens of newspapers, magazines and websites over a 30-year career in journalism. He regularly writes about military hardware, firearms history, cybersecurity, politics, and international affairs. Peter is also a contributing writer for Forbes and Clearance Jobs. He is based in Michigan. You can follow him on Twitter: @PeterSuciu. You can email the author: Editor@nationalinterest.org.
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