USMCA Trade Deal Signed, Congress Approval Still Uncertain
The United States, Mexico, and Canada finalized a trilateral trade agreement, formally known as the United States-Mexico-Canada Agreement (USMCA), on Friday, marking the end of a 15-month negotiation process. This outcome, however, is followed by a challenging new chapter, as U.S. President Donald Trump will face a “Herculean task” to secure its approval by Congress. Doubts regarding Canada’s willingness to sign the deal unless U.S. tariffs on Canadian steel and aluminum were removed persisted until the morning ceremony held during the G20 Summit in Buenos Aires.
The agreement, signed by Prime Minister Justin Trudeau, U.S. President Donald Trump, and Mexican President Enrique Pena Nieto, effectively replaces the North American Free Trade Agreement (NAFTA). Despite the formal signing, the pact retains the existing tariffs on Canadian steel and aluminum, a point of contention that will necessitate a prolonged battle for Canada and Mexico. This situation will likely determine the success of the USMCA, with Prime Minister Trudeau explicitly stating, “It lifts the risk of serious economic uncertainty that lingers throughout a trade renegotiation process, uncertainty that would only have gotten worse and more damaging had we not reached a new NAFTA.” He then directly addressed President Trump, adding, "Donald, it’s all the more reason we need to keep working to lift the tariffs on steel and aluminum between our two countries."
President Trump, in a display of confidence, expressed optimism that the deal would secure approval from U.S. lawmakers, particularly given the recent mid-term elections. However, several key figures offer a more cautious outlook. U.S. trade lobbyist Dan Uzcjo characterized the process as a “Herculean task,” suggesting that domestic challenges, including investigations and the Democrats’ own legislative agenda, will overshadow the trade negotiations next year, stating, “I don’t think there will be enough oxygen in the room for this.” The agreement’s provisions, including minimum wage requirements for auto production – requiring 40 to 45 per cent of production to be done by workers earning at least US$16 an hour – are also expected to face resistance from Congress.
Patrick LeBlond, an associate professor in international affairs at the University of Ottawa, acknowledged that while the agreement was “not the deal we wanted,” it represented a necessary defense against the Trump administration’s policies. He noted that the signing signifies a strategic move to mitigate future economic uncertainty and protect against continued tariffs. The agreement includes a significant protection for Canada: a side letter exempting 2.6 million vehicles and US$32.4-billion worth of auto parts from any future U.S. tariffs on autos. The move also demonstrates the complex interplay of trade negotiations and political pressures.
Beyond the immediate concerns surrounding tariffs, the future of the USMCA hinges on its ratification by the three nations. Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, believes that significant resistance from Congress could lead President Trump to re-invoke threats to withdraw from NAFTA, potentially triggering protracted legal challenges and delays. Existing tariffs, which have inflated prices to 20 per cent above world levels, will further intensify the strategic battle points. Hufbauer predicts that Trump will insist on quotas as part of his strategy, indicating a protracted and potentially contentious negotiation.
Ultimately, the signing of the USMCA is considered a strategic move by Canada, focusing on defense and mitigation. However, the agreement’s ultimate success remains uncertain, given the political landscape and the ongoing challenges posed by the tariffs. As President Trump noted, “It’ll get ratified eventually, but I do expect Trump to re-invoke threats to withdraw from NAFTA,” suggesting that the negotiations are far from over.
