Tensions between the United States, Canada and Mexico: A New Order in the USMCA?
With the recent election of Donald Trump to the presidency of the United States on November 6, tensions between the United States, Canada and Mexico, trading partners and members of the USMCA, have increased significantly, especially in the context of trade disputes between the United States and China. These tensions have generated political, commercial and economic challenges for Mexico and Canada, which have been pressured to align with US protectionist policies or face severe consequences.
Tariff Threats and Modifications to the USMCA
One of the main pressure points has been Trump’s threat to impose high tariffs on products from Mexico and Canada. According to reports, the former president considered on several occasions applying additional tariffs to agricultural and manufacturing products from these countries, arguing that they maintained trade relations with China that harmed the United States. This unilateral approach not only generated uncertainty, but also weakened confidence in the USMCA as an instrument of cooperation.
For example, in 2019, Trump threatened a 25% tariff on Mexican cars if the country did not take stricter measures against illegal immigration. Although the measure was not directly linked to China, it revealed how US trade policies could be used as a tool of pressure on various fronts.
In his recent election campaign, the threat has gained strength again, only this time in a direct and frontal way, revealing its true nature: the import and manufacture of Chinese cars in Mexican or Canadian territory.
Economic and Trade Impacts
For Mexico, the United States remains its main trading partner, representing approximately 81% of its total exports as of 2022. Consequently, dependence on the US market makes Mexico vulnerable to its protectionist policies. On the other hand, Canada faces a similar situation, since almost 75% of its exports are destined for the United States.
Both countries have sought to diversify their markets to reduce their dependence. In 2022, Mexico increased its exports to China by 20%, especially in sectors such as electronics and agribusiness. Canada, for its part, has strengthened its trade ties with Asia-Pacific, being part of the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership).
Trade Relationship with China
Tensions between the United States and China have put Mexico and Canada in a difficult position. Both countries maintain important trade relations with China, allowing them to diversify their markets and take advantage of new opportunities. However, this relationship generates friction with Washington, which sees China as a strategic competitor.
For example, imports of Chinese products to Mexico have grown by 15% in the last five years, while Canada has strengthened technological cooperation with Chinese companies. This has generated criticism from the United States, which seeks to limit Chinese influence in the region.
Pressure to Honor USMCA
Despite tensions, the USMCA remains a key instrument for maintaining trade stability in North America. The treaty’s rules put significant pressure on the three countries to honor their commitments. For example, provisions on regional content in auto manufacturing and labor protections have been important points of consensus.
However, the treaty also faces challenges. The United States has initiated dispute resolution panels against Canada and Mexico, accusing them of violating provisions related to the energy sector and dairy trade, respectively. These disputes could erode confidence in the agreement and pave the way for further fragmentation.
Pacific Deal or Rupture?
The future of trade relations between the United States, Mexico and Canada depends on several factors. In the short term, all three countries are likely to seek to preserve the USMCA, given its economic importance and pressure from business sectors that rely on free trade. However, geopolitical tensions with China will continue to be a destabilizing factor.
While a complete breakdown in North American trade relations is unlikely, Mexico and Canada could intensify their cooperation with China and other international markets if US protectionist policies are tightened. This could lead to a new trade balance, in which North America becomes a more fragmented but also more diversified space.
Conclusion
Trade tensions between the United States and China have created a domino effect in North America, impacting trade and political relations between Mexico, Canada and the United States. As tariff threats and disputes in the USMCA persist, the need to adapt to a changing trade environment is more urgent than ever. Mexico and Canada are at a crossroads: deepen their ties with China and other international partners, or find ways to maintain a stable relationship with their common neighbor.