North American Leaders ‘Take a Deep Breath’ Ahead of USMCA Review

Rebecca Patterson is a senior fellow at the Council on Foreign Relations, a globally recognized investor, and macroeconomic researcher.

Uncertain, pragmatic, and even optimistic: Those were the types of discussions held among public- and private-sector North American members of the Trilateral Commission when they met in western Canada for three days in late October. 

The uncertainty was highlighted in the news at the meetings’ start. U.S. President Donald Trump halted trade talks with Canada and subsequently increased the U.S. tariff rate on Canadian goods by 10 percent in response to a free-trade television advertisement that was released in the United States by Canada’s Ontario province. (The ad was pulled a few days later and Canadian Prime Minister Mark Carney apologized to Trump for it.) 

Pragmatism, meanwhile, was evident in how businesses and policymakers were navigating the current geoeconomic landscape. Rather than pausing in response to heightened policy uncertainty, members were looking for ways to benefit from regional integration beyond federal bodies, borders, and rules. In Canada and Mexico, they were also looking to deepen non-regional trading relationships. 

And despite the current trade war and Trump’s ire flaring, optimism punctuated the meetings as attendees spoke about the array of opportunities for economic growth and regional resilience if uncertainty and government red tape could be sufficiently addressed. 

The regional meeting of the commission—a membership group established in the 1970s to foster cooperation and dialogue around common challenges facing Asia, Europe, and North America—covered issues ranging from security in the Arctic and space to the future of education. That said, the ongoing U.S. trade war and looming review of the U.S.-Mexico-Canada Agreement (USMCA) meant that cross-border economic policies, business, and related collaboration captured most of the agenda.

Across the meeting’s discussions, a few economic takeaways stood out:

“Keep calm and carry on” through the trade war. While some executives involved in cross-border North American trade said they could make small adjustments to their business models, and everyone was exploring the costs and benefits of longer-term changes to plant locations and processes, their emphasis was on maximizing USMCA compliance to avoid recently increased tariffs. 

There was little evidence from the discussions of major adjustments to current supply chains going across the United States, Canada, and Mexico. Indeed, leaders repeatedly cited the cost and time needed to make meaningful adjustments along with the possibility that current policies could change again in the coming years. They also noted that auto supply chains had been moving to North America from Asia and Europe this year, incrementally benefiting the region. As one auto-parts leader said, “You just have to take a deep breath.”  

Developing local relationships to support cross-border trade. The Pacific NorthWest Economic Region, a nonprofit organization, was touted as an example of how some businesses have shifted their approach due to federal government tensions. Under the group’s umbrella, policymakers and business leaders in Alaska, Idaho, Montana, Oregon, and Washington collaborated with the Canadian provinces of Alberta, British Columbia, Saskatchewan, and the Yukon as well as the Northwest Territories to support their respective economies. 

For instance, one policymaker noted that Canada is Idaho’s largest export market, with roughly $1.5 billion worth of goods sent north of the border in 2023, about a quarter of which was agricultural products. In another case, British Columbia and the U.S. states of Washington and Oregon signed a Memorandum of Understanding [PDF] in October to reconfirm their partnership to support the Cascadia region. This includes plans to develop a high-speed rail to connect the cities of Seattle, Portland, and Vancouver.      

“Geography matters” in North American trade. Attendees repeatedly emphasized this point and said it strictly limited any plans by Canada or Mexico to economically decouple from the United States. Cross-border businesses are simply too entrenched, and the U.S. market is too big, for Canadian and Mexican firms to materially move away from the United States without jeopardizing their businesses or broader domestic economies. Similarly, a healthy U.S. economy can’t go at it alone. The United States benefits in terms of costs, supply-chain resiliency, and security from partnering with neighboring allies. (The U.S. Bureau of Transportation Statistics estimated that the U.S. trade with Canada and Mexico in 2024 represented 30 percent of all U.S. international trade that year.)

Critical mineral and energy supply chains were repeatedly mentioned as examples of how the region benefits from cross-border trade. Indeed, Canada, with some of the world’s largest known reserves of critical minerals, led an effort at the latest Group of Seven (G7) meeting to launch a Critical Minerals Production Alliance, which is designed to reduce the West’s reliance on China for these supplies. The deeply embedded cross-border businesses left attendees optimistic that the USMCA would be renewed at the end of its 2026 review, although with likely modifications. (The USMCA includes a “sunset clause” that states that if any of the three countries does not support the agreement during reviews, it will enter a sixteen-year countdown to expiration [PDF].)

At the same time, Canadian and Mexican attendees said they felt their countries’ respective relationships with the United States were permanently changed by some of the policies that the Trump administration implemented. And several noted, partly as a result, that the two countries needed to incrementally diversify their global trade. Illustrating this view, Carney announced in late October that Canada will set a goal of doubling non-U.S. exports over the next decade. One project mentioned as an example of this shift was the liquified national gas floating facility that would allow Canada to export gas off its northwest coast in the coming years.

A regional threat to economic growth and resilience. Trilateral members, especially from the United States and Canada, noted the time and cost that came from what they felt was a steady increase in government regulation in recent years. To encourage innovation and support economic security-related projects like mining, business leaders felt some combination of fewer regulations and more efficient regulatory processes were required. Those at the commission welcomed U.S. and Canadian efforts to address these issues via vehicles as Bill C-5—Canadian legislation passed in June to, in part, speed up regulatory reviews—and the Major Projects Office, which expedites regular assessments for select large infrastructure projects.

While clear-eyed about politics within their countries, attendees were upbeat about the possibilities for the region if collaboration and cooperation remained central. One attendee in the vehicle parts industry noted that North American firms “have centers of excellence” around parts and processes that have developed since the North American Free Trade Agreement was signed in 1992. She suggested that if all three countries work together, they could achieve additional economies of scale through higher volumes and specialization of talent, benefiting each of them and addressing affordability issues. 

The alternative, meanwhile, was a scary proposition: “To have every country make everything again is crazy; it would add so much cost.”

This work represents the views and opinions solely of the author. The Council on Foreign Relations is an independent, nonpartisan membership organization, think tank, and publisher, and takes no institutional positions on matters of policy.