US, Canada and Mexico begin negotiations to renew trade pact

Key Points:

• The U.S.-Mexico-Canada Agreement (USMCA), which governs $1.9 trillion in annual trade among the three countries, is up for renewal, but negotiations are expected to be difficult and prolonged due to contentious demands, particularly from the U.S. side.
• The U.S. is pushing for stricter rules requiring more automotive production to occur within the United States, including a new proposal that 50% of cars be made in the U.S., a move opposed by Canada and Mexico as it disrupts established supply chains and could raise vehicle prices.
• Canada has been largely excluded from recent renewal talks between the U.S. and Mexico, raising concerns that the other two countries might present Canada with a take-it-or-leave-it deal, complicating trilateral cooperation.
• Businesses on all sides desire stability after a turbulent period marked by unpredictable tariffs under President Trump, with small and medium-sized companies particularly affected by complex and shifting trade rules.
• The renewal process includes a six-year sunset clause, and while the pact could be extended as is, negotiators are expected to seek improvements, with the risk that failure to agree could lead to the agreement's expiration in 2036 or earlier if a country withdraws.