U.S. - Mexico - Canada Agreement
U.S. - Mexico-Canada Agreement – The Enduring Power of Three
Download The U.S. - Mexico-Canada Agreement report hereThe United States-Mexico-Canada Agreement (USMCA), which succeeded the North Atlantic Free Trade Agreement (NAFTA) in 2020, represents a modernized trade framework critical to economic stability and growth across the North American triumvirate of nations. It is now up for review.
So why is this agreement important? Put simply it underpins billions in trilateral trade, facilitates complex supply chains and provides a predictable regulatory environment essential for business planning and investment across the continent.
At its core, the USMCA strengthens intellectual property protections and modernizes digital trade rules. For businesses, this translates into greater certainty for innovation, a level playing field for workers, and clearer guidelines for cross-border data flows, all of which are vital for competitiveness.
The automotive rules of origin, requiring a higher percentage of regional content and a significant portion from high-wage areas, have also been instrumental in reinforcing regional manufacturing and supply chains.
The importance of renewing the USMCA now, as it faces its first review, cannot be overstated. A stable trade environment is a cornerstone of economic confidence. Reopening negotiations or allowing the agreement to lapse would introduce uncertainty, potentially disrupting established supply chains, increasing tariffs and complicating cross-border operations for businesses. Such a scenario could deter foreign direct investment, dampen economic growth and lead to job losses across all three nations.
The USMCA provides a bulwark against global economic volatility by fostering strong regional economic ties. In an era marked by geopolitical shifts and supply chain vulnerabilities, a robust North American trade bloc offers resilience and reduces dependence on more distant or less stable markets.
Key Takeaways
1. Growth in trilateral trade: Since its implementation in July 2020, the USMCA has boosted economic activity within North America; trilateral trade in goods and services between the U.S., Mexico, and Canada reached $1.9 trillion in 2024.
2. Investment boost: The agreement has also accelerated investment, with Canada’s direct investments in the U.S. growing over 50% to $732.9 billion in 2024, positioning Canada as the third-largest foreign direct investor in the U.S.
3. Jobs: Improvements in free trade between the three nations has fortified supply chains and increased employment opportunities. Canada created the most jobs in the U.S. between 2020 and 2024.
4. Shifting trade balance: The USMCA has led to a rebalancing of U.S. trade, with Mexico improving its negotiating position relative to Canada and gaining significant U.S. import market share, notably at the expense of China.
5. Risk of non-Renewal and Uncertainty: Failure to renew the USMCA or a move towards separate bilateral deals could introduce significant uncertainty, disrupt established supply chains, increase tariffs, dampen economic growth, and lead to job losses across the U.S., Mexico and Canada.