If USMCA is not renewed, analysts expect uncertainty for businesses

If USMCA is not renewed, analysts expect uncertainty for businesses

Trump had pushed for a new deal during his first term to replace the North America Free Trade Agreement, or NAFTA. The result was the USMCA agreement, which came into effect on July 1, 2020, and is slated to expire after 16 years. Now, on the USMCA’s sixth anniversary, the three countries involved are set to decide whether the trade deal should continue for another 16 years. But it is unclear what the outcome of the review process might be, and critics warn that the uncertainty it creates could generate complications for businesses. If all three countries fail to commit to an extension, it triggers an annual review process, which would put the USMCA up for debate every year until 2036.

“We may get mandatory annual reviews, but that also means that uncertainty prevails, and that’s a negative for decision-making for businesses,” said Tony Stillo, director of Canada Economics at Oxford Economics, an advisory firm. “It’s a definite dampener, for sure.” That, however, is the situation analysts currently expect to result from the July review. “The most likely scenario is that it will go into an annual renewal process,” said Vina Nadjibulla, vice president and head of research at the Asia Pacific Foundation of Canada, a nonprofit think tank. But she added that the dynamics of July’s negotiations remain unclear. She pointed to a lingering question: “Is nothing agreed till everything is agreed, or is incremental change acceptable?”

In the worst case, any party could give six months’ notice and cancel the trade agreement altogether. Nadjibulla noted that Trump might be leaning in that direction. “He has said he wished [the USMCA] didn’t exist,” she said. Trump himself told reporters this month that he felt the US did not need the trade deal. “I don’t know that I’m going to renew it,” he said on June 10, before signalling he is open to negotiation with the deal’s other parties. “We’re talking to them. We’ll see if we