Translated by Valeria Vinciguerra
Introduction
Geopolitical and trade relations in North America are going through one of the worst phases in recent history. At the core of the crisis there is the USMCA agreement (United States-Mexico-Canada Agreement), a free trade agreement among the United States, Mexico, and Canada in effect from 2020, which replaced the North American Free Trade Agreement (NAFTA). Formal review and high-tension negotiations are shaking the foundations of continental free trade, turning an area of economic integration of more than 500 million people into a protectionist battleground.
The intensification of Washington-Ottawa conflict
The situation escalated following the decision of the US administration not to renew the USMCA in the original terms, which were judged not sufficiently convenient for American workers and businesses. The aim was to reach an agreement in August but then every attempt was halted following pressure from President Trump regarding the numerous protections for the language and culture of French-speaking Canada, against which Prime Minister Carney has proven absolutely uncompromising. Taking advantage of new regulatory levers, including enforcement of Section 338 of the Tariff Act of 1930, Washington imposed heavy duties (up to 50%) on several Canadian products, such as alcoholic beverages and dairy products, excluding such goods from USMCA customs protections.
Canada was quick to respond: the Ottawa government imposed retaliatory tariffs worth billions of dollars on U.S. goods. Tension grew as a result of the signing of a presidential memorandum in Washington aimed at excluding Canadian-origin goods from U.S. federal civil procurement and acquisition systems. For his part, the Canadian Prime Minister reiterated that Ottawa cannot accept conditions that would reduce domestic industry to a mere subsidiary of U.S. industry.
Mexico's strategy: between diplomatic prudence and negotiations
While the northern front is marked by cross-retaliation, Mexico, led by President Claudia Sheinbaum, is adopting a cautious diplomatic line while firmly defending its industrial interests.
Mexican authorities are engaged in intensive discussions with the White House to find a broader agreement. The key issues at the negotiating table for Mexico City are the reduction of tariffs on steel, aluminum, and motor vehicles, as well as the sensitive issue of rules of origin for components sourced from outside the region. Despite the pressures and uncertainties associated with the US position, the Mexican government has recently signalled encouraging progress following direct talks at the highest level, aiming to preserve access to the American market and protect integrated production chains.
Future Prospects
The future of the North American economic bloc appears highly uncertain. While Washington aims to use tariff leverage and bilateral negotiations to renegotiate trade flows and counter alleged foreign discrimination, the standoff with Canada and the complex dialogue with Mexico risk fragmenting a market that represents nearly a third of global GDP. The next few weeks will be crucial to understanding whether the three countries can find a compromise or whether the commercial architecture created to replace the old NAFTA will undergo a deep and lasting political rupture.
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