Trade Talks Among U.S., Canada, and Mexico Face Challenges

WASHINGTON (AP) – Tourists from Chattanooga check into beach resorts in Cancun. Canadian auto parts feed factories in the American Midwest – and vice versa. Happy hour revelers raise glasses of Mexican tequila and mezcal at bars in Seattle.

It adds up. The United States trades $1.9 trillion a year – $5 billion a day – worth of goods and services with its neighbors, Canada and Mexico. They have supplanted China as America’s top two trading partners.

So the stakes are high when it comes to fiddling with the rules that govern trade between the three countries. And after a year of President Donald Trump’s chaotic tariff policies, many U. S., Canadian and Mexican businesses would welcome the return of stability across North America.

They are not likely to get it.

The regional trade pact – the U. S.-Mexico-Canada Agreement or USMCA – that Trump negotiated and boasted about in his first term came up for renewal Wednesday, starting a process that is likely to last months, maybe longer.

And the path forward is lined with landmines.

“There’s going to be a lot of drama this summer,” Diego Marroquín Bitar, a fellow in the America’s program at the Center for Strategic and International Studies, said last week at a USMCA forum sponsored by the Cato Institute.

A bumpy road ahead for North American trade

The U. S. is making demands that could effectively force Canada and Mexico to surrender some automaking production to the United States. That might bring more auto factory jobs to the United States. But it would also upend established supply chains and would push up U. S. prices for new cars that now average nearly $50,000 at a time when American consumers are already furious about the high cost of living.

Trump, characteristically, has added to the tension by threatening to pull out of his own agreement altogether.

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In 2020, the USMCA replaced the 1994 North American Free Trade Agreement, which tore down most trade barriers between the three North American countries.

Trump and other critics had called NAFTA a job killer because it encouraged U. S. companies to move factories south of the border to take advantage of low-wage Mexican labor, then ship goods back to the United States duty free.

His USMCA ended up being similar to NAFTA – though it pressured factories to pay higher wages and make sure that more of what they made originated in North America in an effort to prevent Chinese products from slipping across regional borders duty free.

North America trade deal is up for renewal

The USMCA included a novel provision requiring the pact to be renewed every six years. That deadline was Wednesday, and the three countries met virtually. But U. S. Trade Representative Jamieson Greer said in a statement that the United States was not ready to renew the pact as it is for another 16 years – which would have been until 2042. The United States wants changes to the agreement to reduce its trade deficits with Canada and Mexico and to resolve specific disputes over issues such as Canada’s protection of its dairy industry.

The USMCA remains in effect while the three countries continue working on ways to resolve their differences; they have until current term ends in 2036 to reach an agreement. Otherwise, the pact expires.

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Meantime, any USMCA country can pull out of pact provided it gives its two partners six months’ notice – a red buzzer that Canada and Mexico fear Trump just might push.

Trump, after all, said in June that he was “not looking to renew” trade pact with Canada and Mexico. “We don’t need anything that they have,” he said.

Canada is out in cold

The United States and Mexico have held talks on renewing trade agreement. But Canada has so far been stuck on sidelines.

Patrick Childress, partner at Holland & Knight law firm and former U. S. trade negotiator said: “The danger for Canada is this: that U. S government and Mexican government reach agreement on changes core provisions treaty then show up Ottawa say: ‘Here’s what we’ve agreed you can take leave.”‘

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Canadian Prime Minister Mark Carney said that three trading partners plan meet virtually on Wednesday adding: “I’m not looking my pen.”

Carney later said French his priority is update USMCA.

Pushing production USA

The U. S. wants refreshed trade pact do more make sure Chinese goods don’t get through back door.

But most contentious issue is seeking brand-new requirement : that 50% cars made United States , Carney confirmed early June. Currently none USMCA countries gets guaranteed share production.”It’s red line both Mexico Canada , and goes against spirit letter regional integration,” Ocampo said.

Marcos Carias, economist credit insurer Coface , said only 1 5 Mexican Canadian cars imported into United States currently meet % standard.

Vehicle models likely be hit higher costs under plan , he said , include Ford’s Maverick compact pickup truck, Chevrolet’s mid-size Equinox SUV some Nissan sedans-all made Mexico. Carias’ back envelope calculations suggest prices could increase % % most-affected models.

AP Writers Maria Verza Mexico City Rob Gilles Toronto contributed story.

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