Could Mexico Be Out Of The USMCA?

With discussions around a pending USMCA Review, the premier of Ontario’s most heavily populated and U.S. trade-sensitive province believes the current, basic structure of that three-way deal needs to be changed.  Ontario Premier Doug Ford is floating the idea of returning to a Canada-U.S. bilateral trade agreement, much like the deal that was in place before 1994.

The USMCA is scheduled for review in 2026, and one of the greatest challenges facing that review is frustration with Chinese-owned car plants popping up in Mexico. Voicing that frustration, Ford is proposing Ottawa seek a bilateral trade deal with the U.S. and then maybe make a separate Mexican deal.

But first, Ford is demanding that Mexico place import tariffs on China that match those tariff levels already in place by its two USMCA partners. Canada has imposed import tariffs on Chinese electric vehicles, steel, and aluminum in lockstep with the U.S.  Ford is quite open with his frustration with Mexico becoming a back door for cheap Chinese components in Mexican products.

“What I am proposing is we do a bi-lateral trade deal with the U.S., and if Mexico wants a bilateral trade deal, God bless ‘em," Ford said.  "But I am not going to be drawn down with these cheap imports, taking jobs from hard-working Ontarians.  You look at Mexico, they are importing cheap products from China.  They’re slapping a ‘Made in Mexico’ sticker on, and shipping it up, undercutting the market. Unacceptable.”

Ottawa did not endorse the message. Prime Minister Justin Trudeau said that such radical change in the USMCA is not being considered right now. Trudeau did acknowledge that widespread concerns about China’s subsidized price-undercutting is a major concern. Trudeau said that a top USMCA pre-review agenda item is to discuss whether Mexico is united with its trade partners on the Chinese issue.

“About all democracies around the world have expressed varying degrees of concern about Chinese overcapacity and unfair trade practices," the Prime Minister noted.  "We’re going to continue to work with partners like the United States and, hopefully, Mexico as well to make sure we are united.  That is a big topic of conversation that we’re going to have with the new American administration in the coming months.”

When asked if he thought he might be over-stepping his bounds as a provincial premier, Doug Ford was quick to point out that Ontario is Canada’s largest economic-trade jurisdiction with the U.S.  So, Ford said he is unapologetic.

“Do we have a stake in this? More than any other jurisdiction. We do $500 Billion a year in two-way trade. We’d be the third-largest trading partner in the world to the United States if we were a stand-alone country.”

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