The battle over North America’s biggest trade pact never arrived. For months, policymakers and businesses in Washington braced for a turbulent spring and summer over the future of the USMCA, the deal binding the United States, Canada and Mexico. Instead, the war with Iran stripped away the political heat. “Events, dear boy, events,” as former UK prime minister Harold Macmillan once put it.
Earlier this year, fears mounted that President Trump – who had cooled on the pact he once signed – might use the renewal window to force a confrontation or even threaten withdrawal. But with foreign policy dominating the White House’s agenda, the administration took a more measured approach. It confirmed it will not extend the agreement for another 16 years, yet stopped short of any more dramatic action.
“Iran war defuses expected USMCA fight; US blocks long-term renewal but avoids confrontation.”
Part of that restraint reflects a belief inside the administration that the trade relationship has already been reshaped. US Trade Representative Jamieson Greer argues the White House’s tariff strategy has fundamentally altered North America’s economic ties, changing the balance with Canada and Mexico in ways that make a confrontational approach unnecessary. If trade does become more politically driven, however, the US auto industry could be the biggest loser.
The timing is significant. Washington’s effort to recalibrate relations with China depends partly on closer co-operation with its two largest trading partners. Introducing uncertainty into North America’s economic framework risks undermining that strategy. As Arturo Sarukhan, Mexico’s former ambassador to the US, put it in World Cup terms: it would be “a huge own goal”.
As a result, the 1 July virtual meeting between the three countries – once seen as a potential flashpoint – proved subdued. The US has begun formal talks with Mexico and remains in contact with Canadian officials, suggesting negotiations are proceeding without the expected political drama. With midterm elections approaching, analysts expect that calmer tone to continue.
Prime Minister Mark Carney has said he won’t rush to sign a bad agreement but is ready to cut a deal if the right one arises. US-Canada Trade Minister Dominic LeBlanc said on Thursday that Ottawa’s focus was now on “substantive discussions” over the current arrangement.