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:





