The Double-Edged Sword of North American Trade Policy
The vision of seamless economic integration across North America, once championed by the North American Free Trade Agreement (NAFTA), has evolved into a more complex reality under the Canada-United States-Mexico Agreement (CUSMA). Forged in 2020, CUSMA was designed to correct perceived flaws in NAFTA, which former U.S. President Donald Trump famously labeled "the worst trade deal ever." The new pact introduced stricter rules of origin, stronger labor protections, and modern digital trade provisions, aiming to create a predictable, level playing field for businesses across the continent.
A Framework of Success and Growing Uncertainty
Initially, CUSMA was heralded as a resounding triumph. According to a recent Citi report titled "The Enduring Power of Three," total trilateral trade value soared to an impressive $1.9 trillion in 2024, marking a substantial $400 billion increase. The National Association of Manufacturers credits the agreement with propelling American manufacturing output to nearly $3 trillion that same year. Specific sectors, particularly automotive, benefited from rules mandating 75% North American content for vehicles.
Testimonials from industry and political leaders underscored this success. At the 2026 Citi USMCA Forum in Washington, Texas Republican Senator John Cornyn highlighted how the Texas auto industry flourished, adding $19 billion to the state's GDP in 2024 and supporting over 50,000 jobs. Antonio Ortiz Mena, a key figure on the Mexican Foreign Trade Council's USMCA Committee, noted that CUSMA successfully ended the era where NAFTA was used as a "piñata" during every U.S. election cycle, providing much-needed stability.
The Tariff Turbulence Disrupting Progress
However, this hard-won stability is now under significant threat. Despite the framework designed to foster certainty, the Trump administration's imposition of tariffs on intermediate goods from abroad has introduced a new wave of disruption. These tariffs have forced manufacturing firms to raise consumer prices and, in numerous cases, slow down production lines and initiate worker layoffs.
This policy contradiction—promoting continental integration through CUSMA while simultaneously enacting protectionist tariffs—has dampened the very manufacturing and trade growth the agreement sought to secure. The uncertainty is further compounded by looming discussions around the CUSMA review process, creating a cautious and hesitant business environment.
Tangible Impacts on Cross-Border Commerce
The consequences are already measurable in trade data. In the second quarter of last year, Canada's overall exports declined by just over 10%. More strikingly, exports to the United States, its largest trading partner, plummeted by 18.7%, with declines felt across most traditional industrial sectors. This stark reversal highlights how tariff pressures can quickly erode the gains achieved under modern trade agreements.
While sectors like artificial intelligence and the data centers that support it showed notable resilience and growth, the broader manufacturing landscape faces headwinds. The reintroduction of cost volatility and investment hesitation threatens the "gold standard" status once proudly assigned to CUSMA, posing critical questions about the future of North American industrial competitiveness and economic cohesion.
