THE US-MEXICO-CANADA (USMCA) AGREEMENT IS AT RISK

Donald Trump based much of his first presidential campaign in 2016 on criticizing the trade policy of previous administrations, pointing out that it had damaged the United States because more products were imported than exported, and American companies took manufacturing jobs to other countries, leaving entire regions of the United States in ruins.

The main example that Trump used of these “disastrous” free trade agreements was the NAFTA between the United States, Mexico and Canada, which by 2016 had already been in force for 22 years.

Upon becoming president, Trump pressured Mexico and Canada to renegotiate this agreement, so that the United States could reverse the trade deficits it had with its North American trading partners; and in the same way, it could begin to recover the jobs that had gone mainly to Mexico, through the large investments that North American companies had made over two decades in its southern neighbor.

In 2018, a new trade agreement was signed between the United States, Mexico and Canada, the USMCA, which came into force on July 1, 2020.

One of the objectives of the treaty was for the United States to recover the trade surplus with its North American trading partners.

In the case of Mexico, in the first year of Donald Trump's government (2017), the United States' trade deficit with Mexico reached $131,006,000,000.

However, in the last year of Trump's government, the deficit rose to $160,978,000,000. In other words, Trump's predictions that the new treaty would begin to reverse the trade deficits with its southern neighbor not only did not materialize, but the situation even worsened.

In 2024, in his third presidential campaign, Trump has once again singled out Mexico as a trade problem, as China is using the USMCA to ship electric cars to Mexico and then export them to the United States, threatening to impose tariffs of 100% to 200% on Chinese cars coming from Mexico.

Likewise, both the Biden administration and Trump himself have indicated that very high tariffs will be applied to imports of steel and aluminum from Mexico, because China is once again using Mexico as a platform to export those products tariff-free to the United States.

The Biden administration has already established that a 10% tariff will be applied to aluminum exports from Mexico if it is not proven that the metal comes from Mexico; for steel, the tariff is 25%.

The USMCA is the centerpiece of Mexican foreign trade, since for example, in terms of exports to the United States, our country exported a total of $483,986,000,000 dollars in merchandise in 2023, while it imported a total of $299,407,000,000 dollars, which made Mexico the main commercial partner of the United States, surpassing Canada and China.

Thus, Mexico's trade surplus with the United States in 2023 reached $184,579,000,000, so Donald Trump's goals of improving the trade balance with Mexico through the USMCA are far from being achieved.

Therefore, it is highly likely that if Trump becomes president of the United States again, he will take advantage of the mandatory review of the USMCA scheduled for 2026 to now severely cut the United States' trade deficit with Mexico and especially the establishment of factories with American capital in its southern neighbor, which cause the flight of manufacturing jobs from electorally very important states such as Michigan, Pennsylvania, Wisconsin and Ohio.

Both the imposition of tariffs that are not considered within the USMCA, as well as the possible modification of the provisions for the export of cars from Mexico to the United States, could cause the negotiations for the revision of the treaty to collapse.

Similarly, the United States and Canada have stressed their disagreement with Mexico's energy policy that favors the operation of state-owned companies Pemex in oil and gas and CFE in electricity, so if the new Mexican administration headed by Claudia Sheinbaum is not willing to give national treatment to North American companies, that is, that they have the same facilities and advantages as state-owned companies, the USMCA could come to an end.

Likewise, the new constitutional reforms promoted by the outgoing president López Obrador, through which autonomous bodies that regulate government transparency, competitiveness, the energy market, electoral impartiality and the defense of human rights will be eliminated, will put the USMCA on the verge of extinction, since several of these autonomous bodies are considered indispensable requirements within the USMCA itself for there to be legal certainty and impartiality in government decision-making.

And the reform to the Judicial Branch promoted by López Obrador that will require the election by popular vote of members of the Supreme Court of Justice, magistrates and judges at all levels, will open a period of uncertainty and adjustment (reforms to 20 secondary laws will be required) that may cause the stagnation of new investments and even the departure of foreign and even national companies from the country, given the possibility that popularly elected judges and magistrates lack the necessary experience and training and/or are co-opted by political groups or organized crime.

The ambassadors of the United States and Canada have already expressed their fears about the effects that this reform to the Judicial Branch may have on the USMCA, which led President López Obrador to “pause” his relationship with both ambassadors, thus expressing his displeasure at what he considered to be an intervention in the internal affairs of the Mexicans.

Too many open fronts that put at risk the main economic instrument in the relations between the United States, Mexico and Canada, and which in the coming months will find itself in a situation of increasing uncertainty, with the risks that this may have for the economies of the three countries.