North America cannot function as a cohesive economic bloc if its largest member treats commitments as optional.
Section 301 offers power, while the USMCA offers stability.
A s Canada, the United States, and Mexico begin the USMCA review period on July 1, the future of North American trade has never been so grim. The Trump administration’s announcement of new tariffs last week, including on Canada and Mexico, represents yet another risk facing the integrated North American market as the United States abandons rules-based trade.
The stakes of the review of the United States-Mexico-Canada agreement are high.
Canada and Mexico are America’s largest trading partners, and the integrated North American market forms a formidable economic bloc to compete with Chinese manufacturing. The first Trump administration rightly hailed USMCA as the “gold standard” of trade agreements, since it provided a predictable set of rules to encourage trade and investment across North America, while also tackling long-standing concerns, such as labor violations in Mexico.
Now, the United States is pushing for even more stringent rules regarding which manufactured goods qualify for the pact’s preferential treatment. It also wants novel commitments on issues related to economic security, such as investment screening and common tariffs on Chinese goods. If China is the most serious external threat to our economic security, the move to a “Fortress North America” approach of deeply integrated and trusted critical supply chains is sound strategy.
Meeting these demands will require significant political will in Mexico City and Ottawa, which is likely to be found if the overall value of USMCA as a predictable framework remains. Firms operating across North America will also need to make significant investments in reconfiguring supply chains to meet tougher rules-of-origin requirements currently being requested by the United States. This is possible with enough time and money, but manufacturers will be hesitant to pursue large-scale structural changes if they know that policy might change again on a whim.
The new tariffs on Canada and Mexico reveal just how uncertain of a prospect that is. Imposed under Section 301 authority, a broad trade tool that enables the United States to respond to unfair trade practices, the new tariffs are ostensibly related to forced labor concerns in dozens of countries. In reality, these tariffs — and additional tariffs under consideration in a separate Section 301 investigation related to excess capacity — are meant to reconstruct Trump’s sweeping emergency-powers-based tariffs that were struck down by the Supreme Court. The new tariffs include a carve-out for USMCA-compliant goods — an exemption that has been routinely included in other tariff programs. But this is small comfort to those worried about the future of USMCA.
The forced-labor allegations are confounding for Canada and Mexico, as both countries agreed in the prior USMCA negotiations to ban imports made with forced labor. If the United States has concerns about the implementation of these commitments, it can avail itself of the agreement’s formal dispute settlement procedures. More broadly, one of the most important innovations in the existing USMCA was a turbocharged labor-enforcement mechanism, aimed at Mexico’s domestic labor issues, which showed that creativity in rulemaking is possible when the old ones are no longer fit.
But as the United States pursues the parallel tracks of USMCA review on the one hand and thwacking its neighbors with new tariffs on the other, it has become increasingly clear that new rules are not the goal. Instead, the United States is forcefully wielding tariffs to facilitate onshoring of U.S. manufacturing, rules be damned.
The problem is not that tariffs are always inappropriate tools. Quite the opposite — tariffs must be part of the overall response to China’s unrepentant nonmarket practices. But the continued rollout of tariffs against U.S. trading partners on an obviously pretextual basis corrodes the value of U.S. commitments. If Section 301 becomes an instrument applied frequently, USMCA loses its function as a guarantor of stability.
Ultimately, this is a choice between two models of economic leadership. One relies on rules, predictability, and partnership. The other leans on discretion, leverage, and short-term flexibility. Section 301 offers power, while the USMCA offers stability. The challenge for policymakers is that the more the former is used, the less credible the latter becomes.
The question facing Washington is not whether tariffs are useful, but rather whether expanding their use against USMCA partners is compatible with the kind of regional order and rebalanced global trade the United States hopes to achieve.
North America cannot function as a cohesive economic bloc if its largest member treats commitments as optional. As the United States considers the future of USMCA, it should rein in the use of 301 tariffs against Canada and Mexico and instead focus on setting a new high-water mark of rules to govern North American trade and investment.
Emily Kilcrease is a senior fellow and director of the Energy, Economics, and Security Program at the Center for a New American Security. Jamie Tronnes is the executive director of the Center for North American Prosperity and Security.