Trump’s second term revives uncertainty over the USMCA as tariff threats, legal ambiguities, and regional tensions threaten North America’s trade future.
The re-election of Donald Trump has rekindled doubts over the USMCA’s durability, despite its painstaking renegotiation during his first term. The 2020 accord significantly strengthened automotive rules of origin and labor standards—two of its most consequential reforms—while also modernizing provisions on e-commerce, intellectual property, and digital trade. Despite these advances, the administration’s early signals—renewed tariff threats, public rebukes of Canada and Mexico, and the conflation of trade with broader demands on immigration and defense—portend a volatile path to the 2026 joint review. At the heart of the uncertainty is Trump’s willingness to weaponize tariffs and threaten unilateral withdrawal, the same brinkmanship that once nearly unraveled NAFTA.
The legal terrain remains unsettled. While President Trump could attempt to withdraw from the USMCA, such a move would raise thorny constitutional questions. Since the agreement was enacted through a congressional-executive process, it is unclear whether the treaty can be unilaterally terminated—a question the Supreme Court declined to resolve in Goldwater v. Carter (1979). In that case, several members of Congress challenged President Carter’s decision to terminate a mutual defense treaty with Taiwan without Senate approval. The Court dismissed the suit as a nonjusticiable political question, offering no guidance on whether congressional consent is constitutionally required for treaty termination. As such, the applicability of Goldwater to congressional-executive agreements like USMCA remains uncertain. Yet these ambiguities may offer little restraint. As with his prior use of Section 232 of the Trade Expansion Act of 1962, Trump could bypass Congress under the pretext of national security, imposing duties on automobiles, steel, or energy imports and inviting swift retaliation.
The structural integrity of USMCA is already under strain. America’s trade deficits with both Canada and Mexico have continued to widen, providing fresh fodder for Trump’s populist messaging. In 2024, the U.S. posted a $172 billion trade deficit with Mexico and a $63 billion gap with Canada—figures that have reinvigorated calls for tariff escalation and industrial reshoring. While much of this imbalance reflects energy imports from Canada and deep integration with Mexican supply chains, the administration may reframe these dynamics as evidence of “unfair trade,” laying the groundwork for punitive measures.
For North American manufacturers—particularly in the auto and electronics sectors—the primary risk stems from policy volatility. USMCA’s stringent rules of origin have already compelled some firms to restructure their sourcing strategies, a trend likely to accelerate under renewed enforcement. A second Trump administration is expected to revisit compliance thresholds, heighten scrutiny of Mexican production facilities, and investigate suspected transshipment of Chinese goods. Already, Chinese electric vehicle investment in Mexico has drawn fire from U.S. trade hawks, with reports of 29 new factories established since 2023.
The Trump administration seems poised to wield the USMCA review as leverage on issues unrelated to trade. Canada’s defense spending and Mexico’s border enforcement could become bargaining chips—folded into a broader strategy that blurs the line between trade policy and foreign affairs. This represents a sharp departure from prior USMCA negotiations which, though combative, largely stayed within the bounds of cross-border trade. This time, Trump’s team may seek to disregard these boundaries.
If renewal efforts collapse in 2026, the fallout could be severe. Although the treaty’s sunset clause does not trigger automatic termination, failure to reach consensus would erode trust and invite retaliatory tariffs. Businesses may begin preemptively unraveling cross-border investments—especially those built around just-in-time logistics. For the U.S., such a retreat would weaken its strategic position in the nearshoring movement aimed at reducing dependence on China.
Despite these threats, the path forward is not without offramps. North American trade has shown resilience before—most notably during the 2018–2020 renegotiation. If negotiators can once again compartmentalize disputes and recommit to shared economic interests, a revised but intact USMCA may still endure. Achieving that outcome will require not only technical skill but also deliberate political—and personal—gestures from both Ottawa and Mexico City. Neither capital is eager to risk full-scale economic retaliation or the loss of preferential access to the U.S. market.
Stakeholders across North America would be wise to brace for volatility. Mexican companies integrated into the U.S. supply chain, maquiladoras, Canadian energy exporters, and U.S. agribusinesses remain acutely vulnerable to abrupt regulatory shifts. Investors, meanwhile, should watch closely for signs of a formal U.S. withdrawal attempt and the legal pathways that could enable it. If Congress resists, ensuing litigation or political gridlock could paralyze supply chains and unsettle long-term planning.
Ultimately, the future of North American trade may hinge less on spreadsheets than on ideology—and the personalities that shape it. Trump’s second term offers a pointed reminder: in trade, as in politics, rules endure only as long as those entrusted with them choose to uphold them.
FAQ: USMCA Under a 2nd Trump Administration
1. What is the USMCA and how does it differ from NAFTA?
The USMCA (United States–Mexico–Canada Agreement) is a trilateral trade agreement that replaced NAFTA in 2020. While it retains much of NAFTA’s structure, it introduced stricter rules of origin, labor and environmental provisions, and digital trade protections. Learn more.
2. Can the U.S. president unilaterally withdraw from the USMCA?
It’s constitutionally ambiguous. USMCA was enacted via a congressional-executive agreement, and while presidents may terminate treaties, courts haven’t ruled definitively on whether they can do the same for such agreements. Goldwater v. Carter offers precedent, but not clarity.
3. What is the USMCA 2025 review clause?
The USMCA includes a “sunset clause” requiring the three countries to jointly review the agreement six years after implementation. Without mutual consent to extend, the agreement begins a 10-year wind-down period.
4. Why is Trump threatening USMCA withdrawal in 2025?
Trump has cited persistent trade deficits, lax enforcement of rules of origin, and national security concerns—including Chinese transshipment and border control—as justification to reconsider or withdraw from the agreement.
5. What sectors are most exposed to USMCA changes?
- Automotive manufacturing
- Agribusiness and food exports
- Electronics and consumer goods
- Oil and energy exports from Canada
- Maquiladora supply chains in Mexico
6. What is Section 232 and how might Trump use it again?**
Section 232 of the Trade Expansion Act allows the president to impose tariffs on imports deemed threats to national security. Trump used it in 2018 on steel and aluminum, and could again target autos, EVs, or energy.
7. How might Chinese EV factories in Mexico affect USMCA enforcement?
Chinese automakers like BYD and others are investing in Mexican plants to bypass direct U.S. tariffs. This has triggered U.S. scrutiny of transshipment practices under USMCA’s rules of origin provisions. Source