Consider the amount of money involved in the trilateral USMCA trade agreement.  It’s not just about trade and commerce between the USA, Canada and Mexico; the totality of the equation is derived from all of the third-party nations who trade into the North American trade bloc.  There are tens-of-trillions at stake.

As we have outlined for several years the trilateral trade agreement has several material flaws.  With the U.S. economy as the primary consumption economy, both Mexico and Canada derive significant benefits within the USMCA.  Additionally, both Canada and Mexico leverage their unique positions to gain economic benefit from third parties who want to use either country as a backdoor into the U.S. market.

President Trump has long wanted to eliminate the trilateral trade deal in favor of two more controllable bilateral deals, one with Mexico and one with Canada.  In large measure this approach is specifically to end the exploitation by third parties.  President Trump also noted in his discussions with Canadian Prime Minister Mark Carney that the primary function of the USMCA was to eliminate NAFTA.

Keep this in mind.  The purpose of the USMCA was to eliminate NAFTA.

Now we enter the phase of the USMCA where President Trump can exit the agreement or modify the core foundation of the agreement.

For the past fourteen months Mexico has been modifying their trade and economic policy in anticipation of a USMCA change. However, for the past fourteen months Canada has been combative against President Trump, stoking anger toward Trump, and the government of Canada has been openly proclaiming their intention to economically and politically fight and defeat President Trump.

Again, remember the scale of the money involved here.  Additionally, Canada doesn’t have an organic economy if they cannot exploit their market access.  If Trump restricts third party exploitation, Canada loses massive amounts of money.  This is the baseline for Canada’s reluctance to open up the USMCA for renegotiation; they cannot lose their third-party loophole or else they are really in a bad place.

This sets the stage for trillion-dollar interests to frame opposition not only toward President Trump, but also toward any of his economic team who are in alignment with the renegotiation of the USMCA.  Commerce Secretary Howard Lutnick is chief among those targets along with U.S. Trade Representative Jamieson Greer.

Commerce Secretary Howard Lutnick outlines the issue in the first part of this recent discussion. WATCH:

Canada responds with conversations to media.

OTTAWA—Canada’s chief U.S. trade negotiator said her mandate is to preserve the key elements of the existing North American trade treaty, with no intention to significantly revise or rewrite the pact’s terms.

Janice Charette said she doesn’t expect an agreement among the parties before July 1, when a formal U.S.-led review of the U.S.-Mexico-Canada trade treaty, or USMCA, is set to begin in earnest.

She added that she is also seeking relief from hefty U.S. tariffs of up to 50% on key industrial sectors such as steel, automobiles, and aluminum. Canada is America’s largest supplier of both steel and aluminum.

“My instructions are very much about protecting the fundamentals of this agreement, not revisiting them,” Charette said at a conference organized by the Canadian Chamber of Commerce.

“There is no need to renegotiate, there’s no need to open [the treaty] up and change the fundamental underpinnings of it,” she said. “It is a robust agreement,” she added.

[…] Prime Minister Carney appointed Charette, formerly Canada’s chief bureaucrat, as the top trade negotiator in USMCA talks. Over the weekend, Carney released a video statement on YouTube, in which he said Canada’s close ties to the U.S. now represent an economic weakness. Some veteran trade watchers said the prime minister may be setting the stage for USMCA talks to fail.

Charette’s remarks indicate Canada “is basically daring Trump to blow USMCA up and they think Congress or the courts will preserve the deal,” Mark Warner, a trade lawyer who advises clients in Toronto and New York, said. “I think Canada is playing for time and daring Trump to act,” he added. (read more)