From Free Trade to Managed Trade: The Next Phase of USMCA

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The Decisive Podcast: Insights and analysis to empower confident decision-making. 35 min 1 speaker 3 chapters transcribed 1 month ago

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What is the current state of North American supply chains under USMCA?

Kristen Hallam 0:03

You're listening to the Decisive Podcast insights and analysis to empower confident decision making.

Kristen Hallam 0:15

Hello and welcome to the Decisive Podcast. I'm Kristen Hallam, your host for this episode. Today we're looking at one of the most consequential policy questions facing the continent. What comes next for the US-Mexico-Canada trade agreement? The stakes are enormous. In the 12 months to August 2025, trilateral trade across the US-Mexico. and Canada reached about $1.8 trillion US dollars, underscoring just how central this agreement remains to North American growth, investment, and industrial strategy. To discuss this hot topic, we are joined by two members of our amazing country risk analysis team. John Raines, head of North America Country Risk And Jose Enrique Sevilla Masip, principal analyst, Latin America Country Risk.

Kristen Hallam 1:10

John, Jose Enrique, welcome back to the decisive. You prepared a strategic report on the USMCA talks late last year. You found that supply chains across the US, Mexico, and Canada have remained broadly stable since the USMCA entered into force, even through the pandemic and the 2025 tariff shifts. At the highest level, does the evidence still point to continuity? Rather than disruption in North American trade. A lot has happened this year on top of all three countries getting new political leaders recently.

Jose Enrique Sevilla-Macip 1:49

Thank you for having me, Kristen. Certainly, supply chains in North America had remained almost unchanged since the beginning of USMCA in 2020. And in fact, what we've seen at least in the bilateral relation between Mexico and the US is that Mexican exports towards the US have continued to increase, even despite the latest rounds of tariffs on Under the second Trump administration. So far in the first quarter of 2026, we have seen a 5% increase in Mexican exports towards the US. The trade balance between Mexico and the US has continued to favor Mexico. In fact, since the entry into force of USMCA in 2020, To 2026, the trade trade deficit from the US side has increased in 86% in regards to Mexico. That's why this is such a big issue in the US stance ahead of the USMCA review.

Jose Enrique Sevilla-Macip 2:55

But in general terms, we continue to see that regionalization continues. Mexico is quite interested in. In this pattern, because it's aiming to benefit from the reshoring phenomenon. Over the past decade, Mexico has reaped significant benefits from reshoring away from China, not as much as Mexico originally expected, but it is expecting to boost foreign investment flows over the next five, 10 years, based specifically on. the trend of regionalization. Obviously, when we are talking about North American trade, at least for the past 25 years, talking North America always means also talking about China. But I would like to hear what John has to say about the importance of China in the North American trade negotiations.

John Raines 3:48

Yeah, thanks Enrique. I it it is an important issue. And I think it's one that many times we're hearing about in these negotiations is there's this legitimate fear that Chinese firms are just using Mexico as a pathway to get into the US market virtually tariff-free. So I think there is a thing that we need to consider. Is this going to be either a stumbling block for negotiations? Is this going to be a core issue? Or is this something that might be less central now that we've seen that the United States and China have repaired in some ways? their trade friction with the last Sh Trump she summit that happened just a few weeks ago. And I think what you're going to find is that this detente that we've seen from the United States and China can only go so far.

John Raines 4:33

I do think it means potentially lower tariffs on China from the United States and also cross-trade between the United States and China on key key products, including planes, agriculture, semiconductors. But at the end of the day, I think that fear in Washington on Capitol Hill and also in the White House is going to mean that they're going to take a pretty strict line when it comes to Chinese investment. So I think we are going to see investment screening conditionality and also origin tracing for Chinese firms in Mexico and also in Canada.

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Chapters

3 chapters

1 What is the current state of North American supply chains under USMCA? 0:03–7:26 2 How are Chinese firms influencing US‑Mexico trade negotiations? 7:26–33:51 3 What are the four possible USMCA scenarios and which looks most likely? 33:51–35:32

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Kristen Hallam 5 min

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Topics in this episode

Donald Trump 2 China 1 Mexico 2 Ontario 1 USMCA 4 Carney 1 S&P Global 1 Chris Rogers 1 Trudeau 1 Kristen Hallam 1 Greer 1 John Raines 1

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Recorded06 Jun 2026

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Show notes

In this episode of The Decisive Podcast, we examine the future of the US-Mexico-Canada Trade Agreement at a moment of heightened political uncertainty and rising strategic tension across North America. With trilateral trade reaching roughly $1.8 trillion in the 12 months to August 2025, the stakes are high for governments, investors, and manufacturers alike as the 2026 review process unfolds. Drawing on insights from S&P Global Market Intelligence's Country Risk team, the discussion explores why North American supply chains have remained broadly resilient since the USMCA took effect, even through the pandemic and recent tariff shifts. Mexico continues to benefit from regionalization and reshoring trends, while the US is increasingly focused on trade deficits, investment screening, and the role of mainland Chinese firms using North America as a production platform. Canada, meanwhile, faces a more difficult negotiating environment, shaped by tariffs, political friction, and growing divergence with Washington on industrial policy, data rules, and trade alignment. The conversation also revisits four possible paths for the agreement's future, with a growing emphasis on annual renewals and incremental changes rather than a single long-term resolution. That approach could preserve US leverage over both Mexico and Canada, but it would also prolong uncertainty for businesses seeking predictability in cross-border investment and sourcing decisions. The experts assess where the toughest disputes are likely to emerge, including automotive rules of origin, labor standards, agriculture, energy policy, and data regulation. They also point to lower-risk areas such as trade facilitation and regulatory harmonization where technical progress may still be possible. A central theme is the shifting nature of the agreement itself. Rather than a traditional free trade framework, the experts describe the USMCA as evolving into a form of managed trade, one in which tariffs remain part of the landscape and negotiations increasingly serve broader strategic and political objectives. Trade policy is now intersecting more visibly with security concerns, domestic politics, and geopolitical competition, especially in the US-Mexico relationship. The episode closes with a look at the 2026 FIFA World Cup and the security landscape across the US, Canada, and Mexico. The experts assess terrorism, cartel violence, and protest risks around the tournament, concluding that while major disruptions are not the baseline expectation, authorities are preparing for a wide range of threats and operational challenges across all three host countries. If you're looking for a clear, forward-looking view of where North American trade talks may be headed — and what the next phase of USMCA negotiations could mean for supply chains, investment strategy, and regional stability — listen now. More S&P Global Market Intelligence Content: Canada readies ambitious legislation to reform supply chain Picture This: World Cup Security Risks Click here to sign up for our monthly Geopolitical and Economic Risk newsletter For S&P Global subscribers (login required): Assessing the United States-Mexico-Canada Agreement ahead of 2026 review Mexico, US hold first round of USMCA negotiations Mexi-Corridor: Transit route to connect the Pacific and Atlantic oceans Credits: Host: Kristen Hallam Guests: John Raines, Jose Enrique Sevilla-Macip Produced By: Kristen Hallam Edited By: Marz Marcello Published With Assistance From: Sophie Carr, Feranmi Adeoshun

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