Are North American Leaders Joining Forces for the First Time?

The recent World Cup draw at Washington DC's Kennedy Centre highlighted a moment of unity among the leaders of the US, Canada, and Mexico, despite underlying trade tensions. Donald Trump, Claudia Sheinbaum, and Mark Carney shared the stage, discussing trade matters amidst their participation in the 2026 World Cup preparations. The event showcased their cordiality, yet the future of the US-Mexico-Canada Agreement (USMCA) looms large as a review is set for next year.

Last updated: 30 October 2023 (BST)

What’s happening now

The leadership of the US, Canada, and Mexico convened for the World Cup draw, presenting an image of collaboration. However, beneath the smiles, significant trade discussions are ongoing. President Donald Trump is contemplating the future of the USMCA, with options ranging from its expiration to the introduction of separate bilateral agreements with Canada and Mexico. This review is critical, as it will influence trade dynamics and economic relations in North America.

Key takeaways

The World Cup draw served as a backdrop for significant trade discussions.
Trump is considering whether to maintain the USMCA or pursue separate deals.
The USMCA review is scheduled for completion by summer 2026.

Timeline: how we got here

The evolution of trade relations among the US, Canada, and Mexico has been shaped by several key milestones:

1994: The North American Free Trade Agreement (NAFTA) is implemented, establishing a trilateral trade bloc.
2018: The USMCA is negotiated to replace NAFTA, addressing modern trade issues.
2020: The USMCA is signed into law, with Trump promoting it as a significant achievement.
2023: A public hearing on the upcoming mandatory review of the USMCA takes place in Washington.
2026: The review of the USMCA is expected to conclude, determining its future.

What’s new vs what’s known

New today/this week

The recent World Cup draw has reignited discussions about the future of trade agreements between the three nations. Leaders took the opportunity to engage informally, with Trump indicating that he is weighing options for the USMCA's future. This includes possibly dividing the agreement into separate agreements for Canada and Mexico, reflecting differing economic relationships.

What was already established

The USMCA, which has been in place since 2020, aimed to modernise trade relations and was designed to protect industries such as agriculture and manufacturing. It has been credited with providing stability amidst fluctuating tariffs and trade policies. The upcoming review in 2026 is crucial for determining its viability moving forward.

Impact for the UK

Consumers and households

While the direct impact of US-Mexico-Canada trade relations on UK consumers may be minimal, the outcome of these discussions could influence global trade dynamics, affecting prices and access to goods in the UK. Any changes to tariffs or trade agreements may ripple through international markets.

Businesses and jobs

UK businesses involved in transatlantic trade may feel the effects of changes in the USMCA. For instance, sectors reliant on agricultural exports to the US may experience shifts in market access. Additionally, uncertainties in North American trade could impact UK companies that supply goods or services to these markets.

Policy and regulation

The implications of the USMCA review may lead to changes in UK trade policies as well. The UK government must monitor developments closely, particularly regarding any shifts in tariffs or trade agreements that could affect the broader international trading landscape.

Numbers that matter

1994: Year NAFTA was established, creating a significant trade relationship among the three nations.
2020: The USMCA was signed, replacing NAFTA and introducing new trade regulations.
2026: Scheduled date for the mandatory review of the USMCA.
10%: Estimated percentage of US exports to Canada and Mexico under the USMCA.
20%: Proportion of US agricultural exports that go to Canada and Mexico.

Definitions and jargon buster

USMCA: United States-Mexico-Canada Agreement, the trade agreement that replaced NAFTA.
NAFTA: North American Free Trade Agreement, the original trade agreement between the US, Canada, and Mexico.
Tariffs: Taxes imposed on imported goods, affecting trade costs and market prices.

How to think about the next steps

Near term (0–4 weeks)

Watch for further comments from US officials regarding the USMCA and its review process. Anticipate discussions among trade groups and industries on the implications of any potential changes.

Medium term (1–6 months)

As the review date approaches, expect increased lobbying from businesses and industry groups advocating for the retention of the USMCA. The UK should also prepare for potential shifts in trade policies that may arise from these negotiations.

Signals to watch

Results from public hearings regarding the USMCA review.
Statements from US Trade Representative Jamieson Greer about trade policy directions.
Any formal announcements regarding bilateral negotiations with Canada and Mexico.

Practical guidance

Do

Stay informed about developments in North American trade agreements.
Engage in discussions with trade associations about the potential impacts of changes to the USMCA.
Monitor how shifts in tariffs could affect pricing in your sector.

Don’t

Assume stability in trade agreements; changes may occur rapidly.
Neglect the potential impact of US trade policy on your business operations.
Overlook opportunities for advocacy regarding trade issues that affect your industry.

Checklist

Review your supply chain for dependencies on North American markets.
Engage with industry groups to understand collective positions on trade agreements.
Assess how changes in tariffs could impact cost structures in your business.
Stay updated on government consultations regarding trade policies.
Prepare contingency plans for potential disruptions in trade relations.

Risks, caveats, and uncertainties

Trade discussions are inherently uncertain, and the outcomes of the USMCA review may be influenced by political dynamics. The potential for bilateral agreements could lead to different impacts on Canada and Mexico, raising concerns about fairness and equity in trade relations. Additionally, ongoing global economic conditions may affect negotiations and the willingness of leaders to make concessions.

Bottom line

The recent World Cup draw may have showcased a spirit of cooperation among North American leaders, but the future of trade relations remains precarious. With the USMCA review on the horizon, stakeholders must prepare for potential changes that could reshape economic ties and impact various sectors across the UK and beyond.

FAQs

What is the USMCA?

The USMCA, or United States-Mexico-Canada Agreement, is the trade agreement that replaced NAFTA, aiming to modernise and facilitate trade among the three countries.

When is the USMCA review scheduled?

The mandatory review of the USMCA is expected to conclude in the summer of 2026, determining its future and potential changes.

How does the USMCA impact UK businesses?

While not directly involved, UK businesses may feel the effects of any changes to the USMCA, particularly in sectors that rely on trade with North America.