The Trump administration has decided not to renew USMCA, its trilateral trade pact with Canada and Mexico.
The USMCA agreement runs for 16 years and contains a six-year review provision.
Fate of USMCA
A deal on July 1 would have reset the clock to 2042, but just because the three countries did not agree to extend the deal doesn’t mean it will lapse, it just now shifts to rolling annual talks for the next decade.
Annual reviews of USMCA will continue until an agreement is reached in writing to extend or it expires in July of 2036, according to Brian Kuehl, executive director, Farmers for Free Trade.
“It basically kicks the can down the road we go month to month year to year, but we’ve got the cloud hanging over the agreement, right? I mean, it would be a lot better for the countries to say, okay, let’s lock it in for another 16 years, which is the time frame if they reach agreement. Then you’ve got 16 years of stability.”
Tariff Free Trade
That stability comes from tariff-free trade between the three countries and so Kuehl is confident the U.S. is not going to exit the deal. He says there is too much at stake.
“Maybe I’ll be proven wrong, but I think there’s virtually no chance that the U.S. would pull out of the U.S.-Mexico-Canada agreement. I mean, it’s $1.8 trillion worth of trade between the three countries.”
Mexico is our largest export destination for U.S. food and ag products. Canada is our second largest. So he stresses it is critically important for corn, soybeans, pork, ethanol, dairy.
Trump Wants a Better Deal
President Trump and Vice President J.D. Vance had talked for months before the deadline about not extending USMCA because the U.S. could get a better deal, so this came as not surprise.
And there are sticking points farm groups would like to see improved upon says John Newton, vice president of public policy and economic analysis with the American Farm Bureau Federation.
“I think there’s some issues around the edges that we could work on, faster dispute settlement mechanisms being one of those. I think our Southern farmers have some issues around seasonality. So I think all of those, our dairy farmers have issues with the access, the TRQ access that they’ve been provided.”
Farm Bureau is part of a broad-based coalition that backs USMCA.
Newton says, “So, knowing how important this agreement is for our neighborhood to get something done. So we’re actively working on it.”
Failure Not an Option
Kuehl predicts the countries will continue to meet over the next 30 to 60 days and come to an agreement to permanently extend the treaty.
“The bottom line is we’re not on a cliff. This isn’t a dramatic day. But we don’t want to see this uncertainty continue for another six months. The countries need to roll up their sleeves, do their work, and get this thing moving forward,” he concludes.
Annual reviews are separate from a termination clause that any party could trigger to leave within six months.
