Review Question

The North American trade block is comprised of about 500 million people. It is one of the world’s largest, accounting for nearly one-third of global GDP. Regional trade has been facilitated by the Canada-United States-Mexico Agreement (CUSMA or USMCA) signed in 2018. The CUSMA treaty, which formally replaced the North American Free Trade Agreement (NAFTA) in 2020, simplifies trade activity in North America by reducing barriers at the border (tariffs), improving transparency, and fostering reciprocal conditions for economic growth and security. 

After returning to the White House in 2024, President Trump undermined the integrity of the CUSMA treaty by unilaterally imposing a series of “Buy American” protectionist measures (eg., trade tariffs) designed to restrict the flow of Canadian and Mexican exports. This has led to market instability and the economic security of US trade partners. Both Canada and Mexico are seeking exemptions to the unilaterally imposed tariffs and the US federal appeals court recently judged that the trade tariffs are illegal. 

The CUSMA treaty is subject to a formal review by July 2026. However, a successful renegotiation of CUSMA is far from guaranteed given the substantial trade concessions sought by the Trump administration (eg., border security, autos, softwood lumber, supply management). 

Ultimately, the CUSMA review process could result in one of at least three different outcomes. CUSMA trade parties could agree to modify and extend the existing treaty. One of the trade parties could postpone the CUSMA renewal by another 12 months, causing more market uncertainty in North America. Finally, all three CUSMA trade parties could formally withdraw from the treaty.