Key Takeaways
- The Canada-United States-Mexico Agreement (CUSMA) is up for review next year and may expire or be renegotiated.
- U.S. President Donald Trump has stated that the U.S. may let the agreement expire or work out a new deal with Mexico and Canada.
- The deal was signed in 2018 and 2020, and Trump had previously praised it as the "best agreement we’ve ever made".
- The U.S. Trade Representative has suggested that the agreement could be split into two separate deals, one for Canada and one for Mexico.
- Canada has launched its own formal review of the deal, and the U.S. is holding public hearings on its review of CUSMA.
Introduction to CUSMA
The Canada-United States-Mexico Agreement (CUSMA) is a trade agreement that was signed in 2018 and 2020. The deal, which is referred to as CUSMA in Canada and USMCA in the United States, is up for review next year. U.S. President Donald Trump has stated that the U.S. may let the agreement expire or work out a new deal with Mexico and Canada. This comes as a surprise, given that Trump had previously praised the deal as the "best agreement we’ve ever made". However, Trump has also stated that Mexico and Canada have "taken advantage" of the U.S. and that the deal is not fair to the U.S.
The Future of CUSMA
The future of CUSMA is uncertain, with Trump suggesting that the U.S. may walk away from the deal or negotiate separate deals with both Canada and Mexico. The U.S. Trade Representative, Jamieson Greer, has stated that the president’s view is that he only wants deals that are a good deal for the U.S. Greer has also suggested that the agreement could be split into two separate deals, one for Canada and one for Mexico. This is because the U.S. has a different relationship with the Canadian economy than it does with the Mexican economy. The labor situation, the types of goods being made, and the export and import profiles are all different between the two countries.
The Review Process
Under Article 34.7 of CUSMA, the 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. The U.S. is currently holding public hearings on its formal review of CUSMA, which began on Wednesday and will conclude on Friday. Canada has also launched its own formal review of the deal, with Industry Minister Melanie Joly set to appear at the House of Commons international trade committee.
The Impact of CUSMA
The CUSMA agreement has had a significant impact on trade between the three countries. 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. 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. A recent RBC report pointed out that the CUSMA exemptions have been critical in reducing the impact of tariffs on the Canadian economy.
Conclusion
The future of CUSMA is uncertain, with the possibility of the agreement expiring or being renegotiated. The U.S. is considering splitting the free trade agreement into two parts, one for Canada and one for Mexico. The review process is currently underway, with the U.S. holding public hearings and Canada launching its own formal review. The impact of CUSMA has been significant, with the agreement cushioning the Canadian economy and U.S. manufacturers and importers against the worst impacts of Trump’s tariffs. As the review process continues, it remains to be seen what the future holds for CUSMA and trade between the three countries.