USMCA Renewal Looms as Trump Seeks New Trade “Win”
The recent Supreme Court ruling striking down President Trump’s tariffs has shifted the focus to the upcoming review of the US-Mexico-Canada Agreement (USMCA), setting the stage for potentially contentious negotiations. Experts suggest a frustrated Trump may seek concessions from Canada and Mexico, potentially threatening new tariffs as leverage.
Supreme Court Ruling: A Loss of a “Lever”
The Supreme Court decision invalidated tariffs imposed under the International Emergency Economic Powers Act (IEEPA). While the ruling doesn’t eliminate all tariffs – those on steel, aluminum, and certain semi-finished copper products remain – it removes a key tool Trump had used to exert pressure. As one expert place it, the president “lost a lever,” but still possesses other tools for trade restrictions.
USMCA Review: July Deadline and Potential Flashpoints
The USMCA review is scheduled for July. The agreement requires all three countries to agree to maintain the 2020 trade deal. Currently, most goods traded between the US, Canada, and Mexico flow duty-free if they meet USMCA compliance standards. However, the ruling could embolden Trump to pursue more aggressive tactics to achieve favorable outcomes.
US Trade Representative Jamieson Greer has signaled expectations for Canada to open its markets further to American companies, potentially in exchange for avoiding higher tariffs. Specifically, Greer mentioned dairy and other sectors as areas for potential concessions.
New Tariff Threats and Legal Authorities
Following the Supreme Court’s decision, Trump announced a new 10% global tariff under Section 122, addressing imbalances in payments. This tariff is temporary, lasting only 150 days unless Congress extends it. Experts anticipate Trump may explore other legal authorities, including Section 232 (national security tariffs) and Section 301 (unfair trade practices), to justify new trade restrictions.
Trump has also hinted at using “Licenses” to impose trade restrictions, though details remain unclear.
Impact on Canada and Mexico
Canada and Mexico are significant markets for US steel and key sources of metals and minerals. Canada accounted for approximately 70% of US primary aluminum imports in 2024, while Canada and Mexico collectively represented 93% of US steel exports in the same year. The previous tariff exemption for USMCA-compliant products gave these countries a competitive advantage, which has been modestly reduced by the new 10% global tariff.
Mexico is adopting a wait-and-see approach to assess the full impact of the court ruling.
Will the Supreme Court Ruling Encourage Pushback?
Some analysts believe the Supreme Court’s decision could empower opponents of tariffs to challenge Trump’s trade policies. However, Trump’s unpredictable nature makes it hard to forecast his next move.
FAQ
Q: What is the USMCA?
A: The US-Mexico-Canada Agreement is a trade agreement that replaced NAFTA, governing trade between the three countries.
Q: What was the Supreme Court’s ruling about?
A: The Supreme Court struck down tariffs imposed by President Trump under the International Emergency Economic Powers Act (IEEPA), ruling he exceeded his authority.
Q: What is Section 122?
A: Section 122 is a law that addresses imbalances in payments and was used by Trump to impose a new 10% global tariff after the Supreme Court ruling.
Q: What is Section 232?
A: Section 232 allows tariffs to be imposed on imports deemed a threat to national security.
Pro Tip
Stay informed about trade policy changes by regularly checking official government websites and reputable news sources. Understanding the nuances of these agreements can help businesses and individuals navigate the evolving trade landscape.
Want to learn more about international trade? Explore our other articles on global economics and trade agreements.
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