Prime Minister Carney’s ‘Make USMCA Great Again’ strategy will work*
*It’s possibly, very likely, almost certainly the only one that can.
Written by Jack Hughes, Senior Vice President, Planning and Operations, Business Council of Canada.
During his first term, President Donald Trump called the United States-Mexico-Canada Agreement “a great deal” – his praise for the agreement during his second term has been decidedly more circumspect. As the three countries complete the agreement’s mandatory review, Prime Minister Mark Carney has insightfully assessed that the best way to ensure it’s extended for another 16-year period is to make USMCA great again in Trump’s eyes.
It’s likely true President Trump would never have embraced a rubber-stamp review, regardless of what he thought of the deal today. In both business and politics, he’s always scorned the status quo. Still, while we don’t know when he stopped thinking the USMCA was great, it’s shrewd for Prime Minister Carney to focus on the reasons why he no longer does. Some are technical, others political, but fortunately, none appear insurmountable.
When senior representatives from the Business Council of Canada met this past March with the U.S. Trade Representative, Ambassador Jamieson Greer, he emphasized what we had heard from White House officials and Republicans in Congress: President Trump wants to know how extending the USMCA will increase investment in the U.S., including onshoring manufacturing; create new jobs; and address the perceived trade imbalances.
Ambassador Greer also reiterated, as he has said publicly, the Trump Administration has no desire to renegotiate the USMCA’s 34 chapters. It’s a review, not a renegotiation, and the purpose of including a mandatory review mechanism in the agreement was twofold; to afford all three countries the opportunity to assess whether the USMCA was working as intended and, importantly, to identify whether there are ways it could work even better.
With respect to the former, there are three main areas involving Canada where the U.S. believes the USMCA has not lived up to expectations:
allocation of tariff rate quota with respect to dairy
rules of origin for automobiles
digital services policies
The U.S. government position, under both the Biden and Trump Administrations, is that Canada’s interpretation of the agreement remains inconsistent with the commitments it had made.
In the case of both dairy quota allocation and auto rules of origin, the United States was ultimately disappointed by the decisions of USMCA dispute panels. On digital policies, specifically Canada’s digital services tax, the Biden Administration formally requested dispute settlement consultations. It’s not surprising, then, the Trump Administration has made resolving those interpretation and implementation issues a priority for the review.
This is as it should be.
The parties to the agreement have different understandings of how its terms should be applied and they are using the opportunity provided by the review provision to discuss those differences. Whether the two sides thought they were agreeing to different things when the text was negotiated, or whether clarification is required based on how it was later interpreted, the review process is the right time for those discussions.
Wisely eschewing unilateral concessions, Prime Minister Carney has said negotiators are making progress working through the list of trade irritants. Though he hasn’t set down any redlines, not publicly, he’s been steadfast in saying he’ll safeguard Canadian interests.
At the same time, his government is taking actions – such as directing the CRTC to review its decision on online streaming – which signal he may be open to potential compromises.
Yet, Prime Minister Carney appreciates it won’t be that easy.
Anything President Trump can dismiss as ‘tweaks’ on technical issues won’t ‘Make USMCA Great Again.’ In this as in all things, the president will want to say that he achieved an even greater outcome than he did in his first term. This helps to explain the second element of the prime minister’s strategy – suggesting Canada, like Mexico, remains open to possibly greater integration.
It is safe to say few expected Prime Minister Carney to float the idea of deeper integration with the United States in his speech to the Global Progress Action Summit. Just three weeks earlier, he’d warned Canadians that many of our close ties to America had become weaknesses. He repeated that warning at the Global Progress Action Summit but then added Canada’s response “begins by reimagining aspects of North American integration.”
Prime Minister Carney then revealed there were even “options for Fortress North America in selected sectors and to be clear, those offers are on the table.” He extended this olive branch again three weeks later in remarks to the Economic Club of New York: “The examples are legion where we should work together and compete with the world together. To those ends, we have made specific, practical proposals to the U.S. Administration.”
Advocating for a more integrated partnership in areas where the U.S. needs Canadian inputs to be competitive – energy, critical minerals, and aluminum – was bold. It astutely answered the very question President Trump has been asking his officials:
Will extending the USMCA help us to attract investment, onshore manufacturing, create jobs, and reduce global trade imbalances? Answer: “Canada Strong will help make America great again.”
Encouraging evidence of alignment came this week when U.S. Treasury Secretary Scott Bessent delivered his own remarks to the Economic Club of New York – remarks which he framed as “describ[ing] our strategy for economic statecraft, by which I mean the disciplined use of America’s economic power in service of our sovereignty.”
The Carney and Bessent speeches deserve, even demand, to be read as complementary counterparts.
On integrated supply chains, Secretary Bessent said, “[of] course, supply chain resilience does not require every component to be domestic from beginning to end. That would be unrealistic and unnecessary.”
Yet he was equally unequivocal that while, “America welcomes its partners and we are stronger because of them…our partnership now carries expectations.” Prime Minister Carney is managing expectations in every sense of the term.
Speaking to reporters at the conclusion of the Parliamentary sitting, the prime minister agreed that, ultimately, a breakthrough on the renewal of the USMCA will come between himself and President Trump. His strategy makes sense with that mindset.
To use a poker expression, Carney is playing the man, not playing the cards. He knows President Trump won’t make a deal unless he thinks it’s great, so he’s trying to make USMCA great again.
It’s the right strategy. It’s possibly, very likely, almost certainly the only one that can work.
We should keep supply management, and possibly tinker around the quota system, which the USA has never reached the TRQ and paid a tariff. Never. Most Canadians don't want American dairy or poultry, and most especially since Trump with the wholesale arsonist approach to science and good agricultural practices. Furthermore, the USA is comprised mainly of massive corporate farms, while Canada is mostly smaller farms. A typical poultry farm in the USA can have 4-5Million chickens, while a family farm in Canada may have 50,000 chickens. This is where economies of scale do not work for the smaller market. Large USA farms would consume and wipe out our small farms.
We would do better to build our digital sovereignty for Canada, partner with EU, and others for hyperscalers that can compete with the USA oligarch tech companies. We need options, safe options, and we need digital sovereignty inside Canada.
Trump can't easily cancel CUSMA as it was signed off on by Congress, or he would have done this already. Trump and Greer have stated they don't want to heavily change CUSMA (same reason - this requires Congress approval, which likely wouldn't be given). The challenge now is that Trump is busy working to limit any Congress oversight on anything, bypass it entirely. This is being fought at the courts currently. Let's not forget Trump has not honoured any deal he's made, and won't. He's already looking to add tariffs to the EU for pharmaceuticals, against the trade deal he's just made. I'm for waiting it out. Let's see how November midterms shape up.
Notice the author uses "USMCA"... tells you what you need to know about the BCC.