Introduction
The United States-Mexico-Canada Agreement (USMCA) review, set to commence on July 1, 2026, as per Article 34.7, has sparked curiosity and apprehension among stakeholders. The lack of a clear procedure for the review, coupled with the absence of precedents and the involvement of figures like Donald Trump, Peter Navarro, and their anti-China stance, adds to the uncertainty.
Mexico and Canada’s Perspective
Both Mexico and Canada are keen on advancing the review process, given the United States’ unilateral implementation of trade rule changes without adhering to the USMCA’s established mechanisms. This approach has led to a situation where dialogue and negotiation are replaced with “early morning meetings,” rather than constructive discussions.
An Ideal Scenario for Mexico
In an ideal scenario, the Trump administration would acknowledge the USMCA’s success in transforming North America into a highly competitive region. The renegotiation would then focus on updating integration economic rules and setting common objectives, such as a more detailed and ambitious agenda for the mining sector, including trinational exploration of rare minerals, as proposed by Mexican expert Armando Ortega. Additionally, Emilio Romano of BofA Mexico and ABM president emphasizes the need for greater financial sector integration, which currently lags behind manufacturing, agriculture, and logistics.
Current State of US-Mexico Relations
Despite the potential benefits of a successful USMCA review, the overall relationship between the United States and Mexico remains strained. This context necessitates cautious optimism rather than outright enthusiasm as the review process begins.
Trump Administration’s Objectives
The Trump administration aims to introduce changes in trade rules, some of which are already being implemented. These include new automotive origin rules and measures to effectively block Chinese presence while reducing the trade deficit with Mexico. Essentially, these changes aim to weaponize trade relations to secure concessions on migration and crime-fighting issues.
Potential Areas of Conflict
The USMCA review could potentially become a platform for the Trump administration to voice dissatisfaction with certain decisions made by Mexico’s 4T government in recent months. These contentious issues include measures against genetically modified corn, energy reform favoring Pemex and CFE, and judicial power reform.
Legal Implications
Should these actions be challenged by the United States under the USMCA, Mexico and Canada could retaliate by leveraging the agreement to litigate against U.S. tariffs on steel and aluminum, as well as changes in automotive origin rules. Mexico might also use USMCA mechanisms to contest non-tariff barriers on tomatoes.
Zombie USMCA Scenario
A nightmare scenario involves the USMCA surviving in a formal sense while crucial decisions are made unilaterally by the White House, Silicon Valley, or Wall Street. In this case, Mexico and Canada would face the unappealing choice of either rejecting the world’s largest market or swallowing bitter pills.
Key Questions and Answers
- What is the purpose of the USMCA review? The primary goal is to update integration economic rules and establish common objectives, such as a more detailed agenda for the mining sector and greater financial sector integration.
- What changes does the Trump administration aim to implement? The administration seeks new automotive origin rules, measures to limit Chinese presence, and a reduction in the trade deficit with Mexico.
- What potential areas of conflict exist between the U.S. and Mexico? Contentious issues include measures against genetically modified corn, energy reform favoring Pemex and CFE, and judicial power reform.
- How might the USMCA be used in legal disputes? Both the U.S. and Mexico/Canada could leverage the agreement to challenge tariffs, origin rule changes, or non-tariff barriers in specific sectors.
- What is the “zombie USMCA” scenario? This hypothetical situation involves the USMCA surviving formally while significant decisions are made unilaterally, leaving Mexico and Canada with difficult choices regarding market access or concessions.
