Trump Calls CUSMA A "Good Deal," But Threatens Termination

Axel S�rensen

4 min read

Post on May 08, 2025

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CUSMA (USMCA): A Brief Overview and its Significance

CUSMA, or the United States-Mexico-Canada Agreement, replaced the North American Free Trade Agreement (NAFTA) in 2020. This comprehensive trade agreement aims to eliminate or reduce tariffs and other trade barriers between the three North American nations. Its significance lies in its profound impact on various sectors of the economies involved.

• Automotive Industry: CUSMA/USMCA includes stringent rules of origin for automobiles, requiring a higher percentage of the vehicle's content to be produced in North America to qualify for tariff-free trade. This aims to boost domestic manufacturing.
• Dairy Industry: The agreement provides increased access for Canadian dairy farmers to the US market, albeit gradually, a contentious point during negotiations. It also includes provisions for protecting intellectual property rights related to dairy products.
• Intellectual Property: CUSMA/USMCA strengthens protections for intellectual property rights, including patents, trademarks, and copyrights, crucial for innovation and competitiveness in various industries.
• Overall Benefits: The intended benefits include increased trade, economic growth, and job creation across all three countries. The agreement aims to create a more level playing field and address concerns about unfair trade practices.

Trump's Stance: Praise and Threat of Termination

While former President Trump occasionally lauded aspects of the USMCA, particularly its provisions related to the automotive industry and intellectual property, he also repeatedly threatened to terminate the agreement. These threats were often linked to his broader criticisms of trade imbalances and what he perceived as unfair trade practices by Mexico and Canada.

• Statements of Support: Trump often pointed to the increased manufacturing jobs within the automotive sector as a positive aspect of the agreement, reflecting his focus on domestic production.
• Threats of Termination: His threats stemmed from concerns about trade deficits and issues like the flow of illegal immigration. The timing of these threats frequently coincided with political maneuvering or leverage in trade negotiations with other nations. For example, he often linked the threat of USMCA termination with pressure on Mexico to address immigration issues.
• Lack of Clarity: The fluctuating nature of his statements created significant uncertainty and volatility in the markets, affecting investment and business planning across North America.

Potential Consequences of CUSMA Termination

The termination of CUSMA/USMCA would have far-reaching and potentially devastating consequences for all three countries.

• Economic Impact: A sudden collapse of the trade agreement would severely disrupt established supply chains, leading to increased costs for businesses and consumers. This could trigger significant job losses and harm economic growth.
• Trade Wars: The termination could escalate into a wider trade war, with retaliatory tariffs imposed by all parties involved, exacerbating the negative economic consequences.
• Supply Chain Disruptions: The intricate network of interconnected supply chains across North America would be severely disrupted, leading to production delays, shortages, and price increases.
• Foreign Investment: The uncertainty and instability resulting from the termination would significantly deter foreign investment, hampering long-term economic growth.
• Ripple Effect: The effects wouldn't be limited to North America. The disruption of this major trading bloc would create ripple effects throughout the global economy.

Political Ramifications and Future of CUSMA/USMCA

Trump's stance on CUSMA/USMCA had significant political implications both domestically and internationally.

• Domestic Politics: His threats and subsequent praise created division among his supporters and opponents. This exposed deep-seated anxieties about the impact of free trade on the American economy.
• International Relations: His unpredictable behavior damaged the US's reputation as a reliable trading partner, undermining trust and stability in international relations.
• Renegotiation: While the Biden administration has not sought to renegotiate the core tenets of the agreement, it has taken a more collaborative and predictable approach to international trade negotiations.
• Alternatives to CUSMA: While unlikely, a complete breakdown of the agreement could lead to bilateral agreements or a return to a less integrated North American trade system. The future of North American trade depends on sustained cooperation among the three nations.

Conclusion

Trump's contradictory approach to CUSMA/USMCA highlighted the inherent volatility surrounding this critical trade agreement. While the agreement offers substantial economic benefits through increased trade and cooperation, the potential consequences of its termination are severe, impacting supply chains, jobs, and overall economic growth. The political ramifications, both domestically and internationally, are substantial and underline the need for consistent and reliable policies governing North American trade. The future of CUSMA/USMCA remains uncertain, but the importance of maintaining stable and predictable trade relations between the United States, Canada, and Mexico cannot be overstated. Stay updated on the evolving situation surrounding CUSMA/USMCA and its potential impact on North American trade. Follow our updates for the latest news and analysis on this crucial trade agreement.