Breaking News! U.S. Announces Withdrawal from the U.S.-Mexico-Canada Agreement (USMCA)

【Answer 1】 1. Widening trade deficits: The Trump administration consistently adheres to a 'mercantilist' philosophy and exhibits extremely low tolerance for trade deficits. Since 2021, the U.S. trade deficit with Mexico and Canada has not narrowed—but instead widened. Starting in 2023, Mexico even surpassed China to become the United States’ largest trading partner—a development that has generated widespread dissatisfaction in Washington. 2. Supply-chain 'spillover' triggering concerns: U.S. think tanks have observed that, after the U.S. imposed steep tariffs on goods from numerous countries, many multinational corporations did not relocate manufacturing back to the United States—as intended—but instead adopted a 'circuitous national salvation' strategy, shifting supply chains to Mexico or Canada, where tariffs are lower. This outcome directly contradicts America’s stated goal of 'reshoring manufacturing.' 3. Stricter automotive rules of origin: The U.S. Trade Representative’s team is currently taking a hardline stance, demanding that all vehicles manufactured in North America must contain 50% U.S.-sourced parts (raising the overall regional content requirement to 82%). Otherwise, vehicles assembled in Mexico or Canada would face potential tariffs of approximately 15%. II. Maximum Pressure: 'Non-Renewal' Is Not Actual Withdrawal—But a Negotiating Lever In response to the U.S.’s tough rhetoric, Li Fuyi, Deputy Director and Associate Researcher of the Developed Economies Research Division at the Institute of Foreign Economic Studies, Macro-Economic Research Institute of the National Development and Reform Commission, noted: Overall, the U.S. is unlikely to readily abandon the North American free trade system. Its current declaration of non-renewal is primarily a tactic leveraging its central position in global markets to threaten and pressure Mexico and Canada. For the U.S., the '10-year countdown' serves as an exceptionally refined long-term negotiating lever: ・ It avoids the severe market disruption that immediate termination of the agreement would cause; ・ Simultaneously, it wields the 'Sword of Damocles' hanging over Mexico and Canada—both highly dependent on the U.S. market—to compel them to 'concede interests' during upcoming intensive negotiations. ・ Moreover, the U.S. may well bundle non-trade issues—such as immigration management and drug trafficking—into future negotiations as bargaining chips. III. Allies’ Anxiety and Two Possible Trajectories of Future Negotiations Faced with U.S. maximum pressure, Mexico and Canada exhibit both anxiety and a strong desire for stability. ・ Mexico: Heavily reliant on the economic boost delivered by USMCA. Mexican President Claudia Sheinbaum previously sent a letter urging direct renewal for a 16-year term. In response to the U.S. auto-parts barrier, Mexican authorities are actively seeking a balanced solution. ・ Canada: Currently faces numerous bilateral frictions with the U.S. over dairy market access and alcohol tariffs; in recent negotiations, Canada has even experienced marginalization by the U.S. and Mexico. Canada urgently hopes to secure exemption from the potential steel-and-aluminum tariffs threatened under the Trump administration. Experts analyze two likely trajectories: ・ Trajectory One: Mexican and Canadian concessions leading to an 'upgraded' revised agreement (high probability). Given the deep integration of trade among the three nations, Mexico and Canada are highly likely—in the coming months or even across years of annual review meetings—to make substantive concessions on automotive rules of origin and third-party supply-chain oversight. Once these satisfy the U.S. objective of 'solidifying its core position in supply chains,' the U.S. may agree to extend the agreement. ・ Trajectory Two: Complete negotiation breakdown leading to bilateral rupture (low probability). If the three countries remain utterly unable to reach consensus over the coming years—and if Mexico’s and Canada’s red lines irreconcilably clash with U.S. protectionist industrial policies—the Trump administration could indeed overturn the table entirely, issuing a formal 'six-month advance withdrawal notice' and dismantling the trilateral free-trade zone into separate bilateral trade arrangements between the U.S. and each of the other two countries. Conclusion

Steel Trade War Escalates! Global Power Play Under Trump’s Tariff Policy

【Answer 2】 As soon as the tariff hammer fell, the international community reacted immediately. Traditional allies—including the European Union, Canada, and Mexico—responded with particular intensity, forming a coordinated countermeasure front. Canada directly unveiled its retaliation list: proposing 25% tariffs on $155 billion worth of U.S. goods. The European Commission issued a firm statement vowing to 'defend its interests without hesitation'; France’s Foreign Minister went further, calling U.S. policy 'unreasonable.' Under the shadow of a trade war, the global economic and trade architecture is accelerating its restructuring. Countries are tacitly advancing a 'de-Americanized trade system': the EU is speeding up negotiations toward a free trade agreement with Mercosur countries such as Brazil and Argentina; the UK formally joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), becoming its first European member; and the BRICS bloc expanded—with Indonesia joining as the newest Southeast Asian member. Multiple countries are building trade corridors deliberately bypassing the United States, as the White House’s unilateralism pushes its allies toward opposition. Behind-the-Scenes Negotiations at the Table: Quotas in Exchange for Exemptions Beneath the surface of fierce confrontation, quiet negotiations are underway. U.S.-Mexico negotiations and the U.S.-Japan pivot have emerged as critical variables. Breakthrough in U.S.-Mexico Talks: Both sides reached consensus on a 'dynamic quota system'—allowing U.S. buyers to import Mexican steel duty-free within a specified historical trade volume. The new quota ceiling will exceed the standard set under the 2019 agreement, potentially raising Mexico’s annual steel exports to the U.S. to 4 million tons. This design seeks to balance mutual interests: 80% of Mexico’s auto industry’s steel supply comes from the U.S., while Mexico’s steel exports to the U.S. amount to only 62% of U.S. steel exports to Mexico. U.S.-Japan Capital-for-Market Swap: Following his February 7 meeting with Japanese Prime Minister Shigeru Ishiba, former President Trump secured a commitment from Nippon Steel to abandon its bid to acquire U.S. Steel Corporation and instead pledge 'large-scale investment' in U.S. steel mills alongside technology cooperation. In exchange, although Trump did not explicitly grant Japan tariff exemptions, he hinted at introducing an 'equivalent tariff' policy (i.e., equalizing tariff rates between the two countries) and suggested Japan would significantly increase purchases of U.S. liquefied natural gas (LNG). Self-Inflicted Harm: The Economic Paradox of Tariffs Trump’s steel policy is trapped in multiple economic paradoxes. Though ostensibly designed to protect domestic industry, it is in fact severely undermining the foundations of U.S. manufacturing. The most direct impact hits the auto sector. The Alliance for Automotive Innovation warned that the tariffs would trigger a 15% collapse in North American auto production capacity and raise per-vehicle costs by $2,300. Dartmouth College research shows that major steel-consuming firms—including John Deere, Caterpillar, and Boeing—will all suffer significant impacts. Inflationary pressure looms like a sword suspended overhead. The Center for Economic and Policy Research forecasts that businesses and consumers will pay more for steel and aluminum in the short term, while long-term uncertainty will suppress investment. Historical data sounds the alarm: U.S. steel output in 2024 was 10% lower than a decade earlier, and domestic steel mill capacity utilization continues to decline. The sole 'beneficiaries' are U.S. domestic producers—Century Aluminum and Nucor saw their stock prices surge 10% and 6%, respectively, following the tariff announcement. Yet consumers ultimately foot the bill for these short-term gains: the 25% tariff pushed the cost of imported U.S. steel from $755 to over $900 per ton—completely erasing its cost advantage over European steel.

US-Mexico Tariff Deal Stalls Over Steel, Auto Levies, WSJ Reports

23 hours ago

WSJ reports US-Mexico tariff negotiations stalled over disagreements on steel, aluminum, and auto levies. Commerce Secretary Lutnick opposes tariff reductions on these metals despite reported progress from Mexican officials.

reuters

2026-10-15

US-Mexico Tariff Deal Stalls Over Steel, Auto Levies, WSJ Reports

US-Mexico Tariff Deal Stalls Over Steel, Auto Levies, WSJ Reports

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