For months, Washington braced for a turbulent spring and summer over the future of the USMCA, the trade pact binding the US, Canada and Mexico. But the expected fight never kicked off. Instead, the war with Iran has dominated the White House’s attention, stripping away much of the political heat that was expected to surround the pact’s renewal.
Earlier this year, there were concerns the US might use the renewal window to force a confrontation with its neighbours, or even threaten withdrawal. President Donald Trump had already cooled on the deal he once signed, raising questions about how aggressively Washington would approach the next phase. But with foreign policy dominating the agenda, the US took a more measured approach. It confirmed it will not extend the agreement for another 16 years, while stopping short of more dramatic action.
“US confirms no 16-year extension of USMCA as Iran war diverts political heat from trade renewal.”
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 more confrontational approach unnecessary. But if trade does become more politically driven, the US auto industry could be the biggest loser.
The timing is significant. Washington’s effort to recalibrate its relationship with China depends in part 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.
Canadian 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 Ottawa’s focus is now on “substantive discussions” over the current framework. For now, the Iran conflict has become one of the best developments for keeping the trade pact out of the headlines – but the auto industry’s exposure to a political shift means the calm may not last.