# Wall Street Week | USMCA: Can North America’s Trade Deal Survive? https://www.youtube.com/watch?v=jHSzbPRVXio Translation: zh-CN [00:11] This is a special edition of Wall Street [00:13] Week devoted to the USMCA. I'm David [00:15] Weston bringing you stories of [00:17] capitalism. The agreement President [00:19] Trump negotiated among the United [00:20] States, Mexico, and Canada in his first [00:23] term is up for renegotiation. [00:26] As much as President Trump might have it [00:28] otherwise, [00:28] we don't need anything that Canada has, [00:30] we don't need anything that Mexico has, [00:32] but they need everything that we have. [00:34] Some $2 trillion of the North American [00:36] economy depends on trade across borders [00:39] with the US, Canada, and Mexico. But [00:41] exactly what's at stake is different [00:44] depending on the sector. American [00:46] farmers are hurting badly. They're [00:48] desperate for any help they can get to [00:50] expand export markets hurt by other [00:52] Trump trade policies, particularly with [00:54] China. The energy industry doesn't need [00:57] export markets as much as it needs to [00:59] find power wherever it can for all those [01:02] AI data centers coming online. Power [01:04] that right now flows to the United [01:06] States from Canada and from the United [01:08] States to Mexico. But we start with the [01:11] poster child for North American trade, [01:13] the auto industry. Since the USMCA's [01:16] predecessor NAFTA came into effect over [01:18] 30 years ago, autos have been at the [01:21] center of negotiations. The reason is [01:23] simple. The industry is tightly [01:25] integrated across northern and southern [01:28] US borders. Borders like the one between [01:30] Detroit, Michigan, and Windsor, Ontario. [01:36] This is the brand new Gordy How [01:38] International Bridge that spans the [01:40] Detroit River, separating the Motor City [01:42] from Windsor. It was named for the famed [01:45] hockey player who was born in Canada, [01:47] but crossed the border to lead the [01:49] Detroit Red Wings to four Stanley Cups. [01:52] Canada paid for the bridge, but now [01:54] President Trump has put its opening on [01:56] hold, which in itself is unlikely to [01:59] divide the two cities economies. Those [02:01] are not really separate cities. There [02:03] just happens to be a borderline through [02:04] them. [02:05] Economist Paul Krugman won the Nobel [02:07] Prize for his work on trade. [02:09] Stuff does go back and forth. There's [02:11] tremendous amount of specialization, [02:12] which is good for everybody. Reduces [02:15] cost, increase efficiency. One of the [02:17] companies benefiting from that back [02:18] andforth trade is Linear, a manufacturer [02:21] with headquarters outside of Toronto. [02:24] Jim Gerald is its CEO. [02:26] So, we're 60 years old. And really, I [02:29] think when you look at Linear, we're an [02:31] advanced manufacturing and product [02:33] design technology uh company with 37,000 [02:38] uh people global, 87 uh facilities [02:41] around the world. When we talk about the [02:44] auto part of Linar's business, uh, how [02:47] much of your production goes across [02:50] either the Canadian US border or the US [02:52] Mexican border or for that matter [02:54] Canada, Mexico? [02:55] Um, I would say a ton. There is so much [02:58] interconnection integration uh between [03:01] it and I think we've uh demonstrated [03:03] this before. We have one part um that we [03:07] do for an OEM customer uh two OEMs in [03:10] the US and the original part that we get [03:14] is a forging that comes into Mexico [03:17] which goes into the US to get some [03:19] further processing comes into Canada for [03:22] further processing back to the US for [03:24] further processing over to Canada where [03:27] we do the sort of final assembly and [03:30] then that gets distributed back into the [03:32] US as well as Mexico and Canadian uh [03:35] auto plants. So again, you can see this [03:39] full integration of this, you know, [03:41] supply chain uh in the automotive North [03:44] American area. And one thing we say is [03:46] you can't unbake the omelette, right? [03:49] Manufacturing has become a regional [03:52] game. Shannon O'Neal is the director of [03:55] studies at the Council on Foreign [03:56] Relations, author of the book The [03:58] Globalization Myth: Why Regions Matter, [04:01] and a Bloomberg Opinion contributor. [04:04] The strength, frankly, of the US auto [04:06] industry is really a North American auto [04:08] industry. It is that because cars and [04:11] car parts are produced across Mexico, [04:13] Canada, and the United States, they are [04:16] strong, they are competitive, and [04:18] they're affordably priced. And it's that [04:20] connection, those supply chains across [04:22] North America that are important for [04:24] autos. They're important for all kinds [04:25] of manufacturing. [04:27] Given how the I'll call it North [04:29] American auto industry has evolved, is [04:31] it even possible to cut off imports and [04:34] exports of automobiles and auto parts [04:36] between the United States and Canada [04:38] andor Mexico. [04:39] There's a real question. If we didn't [04:40] have NAFTA, if we didn't have USMCA, [04:42] would we have a North American car [04:43] industry at all? If we didn't have the [04:46] economies of scale of production that [04:48] have now developed over North America, [04:50] could we bring back just a US- produced [04:52] car? Sure, we could, but it would be a [04:54] much more expensive car. It would likely [04:56] be a less innovative car in terms of the [04:58] parts that go into it, and it would be [04:59] really hard to compete against imports [05:01] from Japan, South Korea, Europe, and [05:04] other places. [05:06] The US MCA may have been a winwin for [05:09] auto industry companies like Linear and [05:11] for American consumers, but it hasn't [05:14] necessarily addressed President Trump's [05:15] underlying concerns about the balance of [05:17] trade between the US and either Canada [05:20] or Mexico. For 2025, the US trade [05:23] deficit with Mexico was nearly $200 [05:25] billion, with Canada about $46 billion. [05:29] But O'Neal says regardless of the trade [05:32] deficit, President Trump is [05:33] underestimating the extent to which the [05:35] US needs trade both ways with both [05:38] Canada and Mexico. [05:40] What we see is a big influx of goods [05:43] coming from Mexico to the United States [05:45] is now the number one exporter to the [05:47] United States or US importer. Um, in [05:49] part that's replacing Chinese trade. In [05:51] part that is just the strength of North [05:53] American supply chains and the back and [05:54] forth of goods and services that move [05:57] there. Um, but we also need to remember [05:58] that Mexico and Canada are the number [06:01] one export markets for US companies, for [06:04] US products that go out into the world. [06:06] So, we are very dependent on them as [06:09] they are on us. [06:10] Another concern often expressed by [06:12] President Trump when it comes to trade, [06:14] particularly in the auto industry, is [06:16] the loss of jobs. Something Krugman [06:19] admits is real, but not really the fault [06:22] of the USMCA. What do you say uh to [06:25] people from my home state of Michigan [06:27] who hear President Trump say, "You know, [06:28] that's such a good idea. We're going to [06:30] actually have some barriers put up so [06:32] that we have more of those plants in [06:34] Michigan, in Ohio, so we have better [06:37] jobs because we have lost a lot of those [06:39] jobs. [06:39] We have lost a lot of jobs, but it's not [06:41] mostly because of NAFTA, right? The I [06:44] still call it NAFTA. Sorry, it's a lot [06:45] easier given that Trump keeps changing [06:47] the name, but anyway. Um, do we have [06:50] fewer manufacturing jobs in the United [06:53] We have fewer auto jobs in the United [06:54] States because of the USMCA? [06:57] I think that's highly doubtful. The idea [07:00] that somehow [07:02] turning our back on the world here is [07:04] going to add jobs is [07:08] probably wrong. [07:09] And then there's China. Not part of US [07:12] MCA negotiations, but always a spectre [07:15] in the room. China is looming over all [07:18] of these negotiations and this real [07:19] worry about China selling products into [07:22] the United States using Mexico or Canada [07:24] as a backdoor in right getting the [07:26] benefits of free trade without actually [07:28] being party to the negotiations and to [07:30] the agreements. And so what we've seen [07:32] is Mexico in particular push back [07:34] against Chinese imports which have grown [07:36] dramatically over the last 5 years into [07:38] Mexico. Some of this are cars and and [07:41] car parts and the like. Some are other [07:43] electronics and the like. So we've seen [07:44] them push back to really support North [07:46] America. And as we get into the USMCA [07:49] negotiations, China and this idea of [07:52] trans shipment of shipping parts in [07:53] through Mexico to the United States is a [07:56] big part of the conversation. And one [07:58] can see and I think all parties are open [08:00] to creating a real North America [08:02] fortress visa v China, visav other [08:04] imports from around the world. [08:06] We're in a world now where as we've seen [08:08] uh interdependence can be weaponized. We [08:11] used to think that that was something we [08:12] did to other countries, but now we find [08:14] out that other countries do it to us [08:15] too. So the idea that you need to [08:17] maintain capacity in your own country or [08:20] in reliable allies for strategically [08:24] important stuff is now very very real. I [08:27] am really reluctant to be where I am [08:29] right now, but I do think that [08:31] conditional tariffs on Chinese cars are [08:34] probably going to be necessary. I don't [08:36] think that the Europeans can allow their [08:39] auto industry be to be totally hollowed [08:41] out. Now, there's some compromise here. [08:43] You probably totally trying to shut [08:46] Chinese cars out of the market is going [08:48] to be a bad thing, be very costly to [08:50] consumers. But on the other hand, I've [08:53] been shocked not only by my own change [08:55] of of mind, but by th by some of my [08:58] colleagues uh people who are longtime [09:01] advocates of globalization and free [09:02] trade who are saying okay uh Europe [09:05] needs to do some really if you like it's [09:09] national security. It's it's uh market [09:12] disruption to just allow something as [09:15] big as the European auto industry to [09:18] just be overrun [09:20] even if consumers would benefit for a [09:22] while. It's not 20 years ago anymore. We [09:25] really do need to rethink which is a [09:28] long way from saying that we should have [09:30] tariffs on everything or that the [09:31] Europeans should have tariffs on [09:33] everything. But uh a much more inter [09:35] interventionist position has become [09:38] really hard to avoid. But for all the [09:40] concern about trade deficits and jobs [09:43] and putting sand in the gears of the [09:45] North American auto industry, those most [09:48] closely involved have one concern above [09:50] all. [09:51] I would say certainty is got to be the [09:54] prize award that we've got to be chasing [09:56] here. Um I just think that is uh [09:59] absolutely um uh critical to have that. [10:03] The great virtue of this whole world's [10:06] trade system that the United States [10:07] basically set up after World War II was [10:10] that it provided wasn't just that the [10:12] tariffs were low, though that's [10:13] important, but even more important, [10:16] things were predictable. I would almost [10:18] prefer that Trump put on more tariffs on [10:21] Canada and Mexico, but committed to keep [10:24] them in place, then have rolling [10:26] negotiations where every year you don't [10:28] know what next year will be like. If you [10:30] were advising President Trump how to win [10:33] the negotiation with Canada and Mexico, [10:36] what would you advise him? The [10:37] USNCA is an easy case because this is [10:40] not there is no trade conflict here [10:43] except in Trump's mind. Uh all of the [10:46] things we're talking about are not a [10:48] problem for the USMCA. We shouldn't be [10:51] worried about being dependent on [10:54] Canadian aluminum. They've got the the [10:57] hydro power. They've got the cheap [10:58] electricity. They're right next to us. [11:01] They they speak almost the same [11:03] language. This is not an issue. We are [11:05] not really worried about the US auto [11:08] industry being hollowed out by Mexican [11:10] auto production because Mexican auto [11:11] production is part of an integrated [11:13] system. What which actually probably [11:15] makes the US more competitive. No. So, [11:18] no, the USMCA [11:21] uh or you maybe just rename it NAFTA and [11:23] go back to the original purpose, which [11:24] is this is a case where it really makes [11:27] sense to have a a true free trade area. [11:29] In fact, if I could, I would say this is [11:31] a case where we should go beyond free [11:33] trade to a European Union style customs [11:36] union with free movement of of goods [11:38] across borders, no no checks at all, uh [11:41] a common external frontier for goods. We [11:44] we have a real problem with China. The [11:46] problem with Mexico and Canada is just a [11:49] figment of the president's imagination. [11:53] Next, we turn from a vibrant auto sector [11:55] crossing national boundaries to an [11:57] agriculture sector struggling to keep [11:59] its head above water and what American [12:01] farmers need most from a renegotiated US [12:04] MCA. [12:10] This is a story about not making things [12:12] worse. As the US, Mexico, and Canada [12:15] negotiate over continuation of their [12:16] three-way trade agreement, US farmers [12:19] look on with apprehension. They've [12:21] already been hit hard by troubled export [12:23] markets elsewhere in the world, [12:25] particularly to China. Our farmers are [12:30] true patriots [12:34] because China and others have targeted [12:39] China had others remember this have [12:42] targeted our farmers [12:45] in rural Iowa. Stu Swanson has just [12:47] planted his 34th and likely most [12:51] challenging crop. [12:52] Unfortunately, the clock is ticking on [12:55] us. We're at this point where we need to [12:57] get a plan going forward or the [12:59] operation may come to an end. And my [13:01] farming operation, I would do anything I [13:04] had to keep it alive. I would go find [13:07] another job. I would downsize or upsize [13:10] or whatever I need to do. But the [13:13] heritage of and the sacrifices that um [13:16] my parents and grandparents made, I [13:18] don't want to be the generation or the [13:20] person that that fails and lets them [13:23] down. Is something I think about daily. [13:26] It's something I think a lot about in [13:27] the dark and night that keeps me up. We [13:30] have to find a way going forward and and [13:32] we've kind of been operating on hope the [13:34] last few years. That hope is starting to [13:37] dwindle. [13:39] Swanson is a corn, soy, and pig farmer [13:42] and on the board of the Iowa Corn [13:44] Growers Association. We met him a year [13:46] ago on his farm amid a tough period for [13:49] the agriculture industry. [13:51] A lot of farms, I understand, are [13:53] actually cash negative. Uh are you cash [13:56] positive? [13:57] Uh I haven't ran a number to tell you [14:00] today. Uh certainly we know that uh over [14:04] the last three years we've seen about a [14:06] 30% decline in in commodity prices. I [14:09] think over that same time uh we've seen [14:11] the nine major crops all be uh uh [14:16] underwater. So we are producing at a [14:18] loss on the nine major crops. [14:20] In the years since conditions appear [14:23] only to have gotten worse even after a [14:26] 12 billion aid package from the Trump [14:28] administration. It's been a tough winter [14:30] and spring. Uh we've lost farmers in our [14:33] neighborhood and across the state uh [14:35] that took their lives because of the [14:37] struggles they've seen. We've seen [14:39] farmers that weren't able to get [14:40] financing for the 2026 crop. And so [14:44] unfortunately uh when we have low [14:47] returns at some point the financing [14:50] dries up. If US trade policy overall has [14:53] been rough on farmers, the one bright [14:55] spot has been the US MCA, which has [14:58] shifted exports from declining Chinese [15:00] business to growing business with Canada [15:02] and Mexico. Since 2023, China has [15:06] slipped from the top export market for [15:08] US agriculture to third with Mexico now [15:11] top and Canada second. Since NAFTA uh to [15:15] today, since it was inception to today, [15:18] US a exports to Mexico and Canada have [15:21] grown about 600%. [15:25] Tom Halverson is the CEO of Coobank, [15:27] which operates as a farm credit bank. [15:30] The most important thing I can say about [15:31] that is, you know, this has been a [15:33] massive trade liberalization success in [15:37] the agricultural sector. I'm not going [15:39] to speak to autos or other industries [15:40] and so forth, but from an agricultural [15:42] perspective, it's been a tremendous [15:44] success. Does that mean every single [15:46] agricultural producer in every nook and [15:47] cranny of the United States has benefit [15:49] from it? No. That's not the way [15:51] economics works, right? You have [15:52] winners, you have losers. But the [15:54] biggest number of winners, the biggest [15:57] incremental value creation uh has come [16:00] from the liberalization of these [16:01] markets. To me, uh moving backward would [16:05] be to uh reverse that trend. [16:08] increase tariffs, increase market [16:10] barriers, uh drive our closest neighbors [16:13] and colleagues in Canada or Mexico to [16:15] retaliate against us in a way that would [16:17] harm our access to those markets. Just [16:19] remember, these are the two largest [16:21] markets for American agricultural [16:23] exports in the world. They happen to be [16:25] our closest neighbors uh and where we [16:28] have the greatest ability to [16:30] incrementally grow our volume. The more [16:32] successful and the more prosperous [16:35] Canada and Mexico, the more prosperous [16:37] and successful is the United States in [16:39] general, but particularly American [16:41] agricultural producers. [16:42] It's why both Halverson and Swanson [16:44] value stability over all else as the [16:47] USMCA comes up for review. They favor a [16:50] 16-year renewal instead of potential [16:53] annual reviews. From the point of view [16:55] of an American farmer, uh, taking a look [16:57] at this renegotiation of USMTA, what's [16:59] the best they might hope for and what's [17:01] the worst they might fear coming out of [17:03] the negotiation? [17:04] I think the the best that we can hope [17:06] for here is we keep all the uh uh [17:09] benefits that we have of the [17:11] liberalization we've accomplished over [17:12] the last 30 years and then we add a [17:14] little bit to it, right? So that over [17:18] the next 16 years, if we get a if we get [17:20] a push out for 16 years of a of a [17:23] renewal, that would provide a great deal [17:25] of stability and confidence for our [17:28] agricultural producers to say, "Hey, [17:30] this is a framework of trade that's [17:32] going to last and be stable and I'm not [17:34] going to have any unexpected negative [17:36] consequences for quite some time. [17:38] Therefore, I can have some confidence in [17:40] making long-term investment decisions, [17:42] right? Because one of the things we're [17:44] having difficulties and challenges with [17:45] in certain sectors right now because of [17:47] trade uncertainty is people don't know [17:50] they're delaying making investment [17:51] decisions, right? Because they don't [17:53] know if that investment decision is [17:54] going to be wise or not. If tariffs and [17:57] the changes in their costs and and [17:59] ability to sell their product are going [18:01] to be meaningfully affected. [18:02] That suggests perhaps almost as [18:05] important as the terms is the duration. [18:07] Yes. [18:08] Because you need that certainty if [18:10] you're a farmer. I think it's fair to [18:12] say that if we got the if we got a [18:14] continuation with a little bit of a [18:16] little bit of small L liberalization [18:18] somewhere some benefits in dairy or some [18:21] other place but it was only for a year [18:23] and and we were all told well we're [18:25] going to do this year after year after [18:26] year indefinitely into the future that [18:28] would not eliminate or mitigate the [18:30] problem that we have of of long-term [18:32] uncertainty because we're not building [18:34] power plants with a 40 or 50 year life [18:36] here but we are making lots of long-term [18:38] investments and that is often times very [18:41] significantly impacted uh by the trade [18:43] regime. Right now about 20% of our [18:46] agricultural product uh in total has to [18:49] be exported. We have no population [18:51] growth in the United States right now. [18:53] So the more agricultural productivity [18:55] and output we have it's not hard to [18:58] recognize that it's got to go someplace, [19:00] right? And we're not going to consume it [19:02] here in the United States. So the [19:04] long-term future for US agriculture can [19:06] be defined as exports, exports, and more [19:09] exports. [19:10] In corn, one of the destinations for [19:13] those exports increasingly is Mexico. It [19:16] is the largest export market for US [19:18] corn. According to USDA data, the US [19:21] exported almost 4 million tons of corn [19:24] to Mexico in the first 2 months of the [19:25] year, an increase of around 11% from the [19:29] same period last year. [19:30] It's like 6.5% of the total production [19:34] goes to Mexico alone. uh the two [19:36] countries combined when you look at corn [19:39] and corn products it's about 1.8 billion [19:42] bushels of corn which is the entire [19:44] production of the state of Minnesota or [19:46] again that carry out that we have. So if [19:49] we don't have this relationship of of [19:51] the three countries we're looking at [19:53] doubling our carry outs and then finding [19:56] a a situation where we just simply won't [19:58] be able to dig ourselves out of that [19:59] kind of a hole. So it's a really really [20:02] big deal. It's the gold standard in my [20:04] mind. It's something that we could [20:05] replicate across across the world. [20:08] But despite it being the gold standard [20:10] for US farmers, America does run a trade [20:13] deficit in agriculture with both Mexico [20:16] and Canada, which could have the [20:18] potential to be a sticking point for the [20:20] Trump administration, [20:21] which which we've had for three or four [20:22] years now. It's the natural aggregation [20:25] of the market forces and decisions of [20:27] American consumers. Uh you probably do [20:30] like I do and most of the people we know [20:32] want to have, you know, fruits and [20:33] vegetables. we used to not get in the [20:35] winter time. Now we want them 365 days a [20:37] year, that means we have to buy them and [20:39] import them from other places. And the [20:41] result of that is even though we're [20:43] exporting more and more agricultural [20:45] volume, we're also importing more. That [20:48] has resulted in our agricultural balance [20:50] of trade uh going negative. [20:52] President Trump has long talked up his [20:54] support from and for farmers. And [20:57] earlier this month, he traveled to [20:59] Wisconsin to meet with them. As [21:01] president, I fought for the American [21:02] farmer like no one has ever fought [21:04] before. Nobody's like I'm up here today. [21:06] I don't need this. I got elected. I [21:07] don't have What the hell do I have to be [21:09] here for? [21:10] My personal uh judgment, what I do and [21:13] what I encourage customers and people I [21:16] talk to to do with all politicians quite [21:18] frankly is, you know, listen carefully [21:19] to what people say, but watch what they [21:21] do. Watch what the results of the [21:23] policies are. uh try and understand what [21:25] the intended unintended results are and [21:27] then always watch extremely carefully [21:29] and closely for what always happens [21:32] which is the unintended consequences [21:33] because it's often the unintended [21:35] consequences that are the most [21:36] consequential uh and come at you from an [21:40] un unexpected uh perspective and I think [21:43] um you know one of the places to look [21:45] always for uh unintended consequences is [21:48] you know when you think you have a very [21:50] strong uh negotiating position when to, [21:54] you know, put tariffs on somebody and [21:56] don't expect them to retaliate and then [21:58] they do, right? The unintended [22:00] consequence of that is, well, they did [22:02] and now that's costing, you know, our [22:04] producers or our industry. [22:06] Be it a trade dispute with China putting [22:08] a halt to soybean orders or the war in [22:10] Iran driving up fertilizer costs. [22:12] Farmers have felt the brunt of those [22:14] unintended consequences. [22:16] I'm excited that President Trump has uh [22:19] initiated lots of trade talks. Uh, I [22:22] would like to see more details and I [22:24] would like to see the boats loaded and [22:25] and product moving. Unfortunately, it's [22:28] not moving as fast as I would like. I [22:30] think all farmers when we hear about a [22:32] trade deal, we expect that tomorrow [22:34] we'll see the price go up and we'll see [22:35] the products moving and our carry out [22:37] going down. But we haven't seen that [22:39] yet. Now, uh, because I I think we're at [22:42] a crossroads where, uh, we might need to [22:44] look at farm policy a lot different than [22:47] we have in the past. And this might be [22:49] the time where we uh change direction on [22:52] some of these things including subsidies [22:54] and payments. If we can utilize the [22:56] benefits of the government in terms of [22:58] trade investment into new domestic uses [23:01] to help find new markets for us, I think [23:04] that's the way we have long-term [23:06] success. This is the end of the line [23:08] here pretty quick. Uh I think we've seen [23:11] the start of the loss of farmers [23:14] permanently one way or another. I think [23:16] that we could increase the speed of the [23:19] change of agriculture. [23:21] For corn farmers like Stu Swanson, the [23:23] change needed may not be in the US MCA [23:26] at all. They've seen their exports rise [23:29] to both Canada and Mexico. What they [23:31] need are trade deals with the rest of [23:33] the world to restore export markets that [23:35] they've lost. [23:39] Coming up, from cars to farms to new [23:41] technology, what the energy business [23:43] needs in North America to generate all [23:46] that power AI is looking to consume. [23:52] This is a story about parallel play. If [23:56] North American trade in autos goes back [23:58] and forth among the three countries and [24:00] trade in agriculture is largely US [24:02] exports, when it comes to energy, one [24:04] size definitely does not fit all. The US [24:07] generally imports oil from Canada and [24:10] exports natural gas to Mexico. The USMCA [24:13] may aspire to be multilateral, but in [24:15] practice, it looks more like two [24:17] bilateral arrangements. David Guro [24:20] brings us the story. [24:23] Howard Energy Partners has a natural gas [24:25] pipeline that runs from South Texas to [24:27] Mterrey in Mexico. It supplies part of [24:30] the 6.4 billion cubic feet of natural [24:33] gas Mexico imports from the US each day. [24:37] We're the only one that actually crosses [24:39] the border on both sides of the border [24:41] with the same ownership. There are other [24:43] pipelines that end at the border of [24:46] Mexico and Texas, uh, but then gets [24:48] picked up by another company in Mexico [24:50] and continues on. We're the only one [24:52] that actually, uh, crosses the border, [24:54] but there's there's probably on the [24:56] order of 10 pipelines that cross into [24:59] Mexico from the US. [25:00] CEO Mike Howard sees Mexico's reliance [25:03] on the US firsthand. All business starts [25:06] with energy and the energy business is [25:08] the business that powers every other [25:10] business. So whether they produce their [25:12] own energy or not, they need the energy. [25:14] And so if a US company is not invited to [25:17] own infrastructure in Mexico, somebody [25:20] needs to build it. So if they want to [25:21] build it, that's fine. I think America [25:24] has the most affordable, most reliable [25:26] forms of energy to give to them. Energy [25:29] trade standards between the US, Mexico, [25:31] and Canada were first established by [25:33] NAFTA, which included zero tariff [25:35] treatment for oil, natural gas, and [25:38] refined petroleum products. The flow of [25:40] energy exports had been integrated [25:42] across all three countries. But in the [25:44] intervening years, that's changed. [25:46] Well, the thing about North America is [25:49] that most of the times it works as two [25:51] very big bilateral relationships. The [25:53] the US and Mexico on one side, the US [25:55] and Canada on the other. Diego Marukin [25:58] Betar is at CSIS. [26:00] We have to keep in mind that we have a [26:02] North American energy machine that it [26:05] turns has turned for over a 100red [26:07] years, not just the past 30 years since [26:09] NAFTA. I think the main difference now [26:11] is that as years go by, the US market [26:14] becomes increasingly dependent, [26:16] increasingly interconnected to the [26:18] Mexican market and to the Canadian [26:20] market. You can see it clearly for [26:22] example on oil. 60% of US oil imports [26:27] come from Canada. The refineries in the [26:30] US are adapted in order to refine that [26:33] sour crude oil from Canada. In the case [26:35] of Mexico, 70% of the natural gas that [26:39] Mexico imports yearly comes from the US. [26:41] 60% of the electricity generated in [26:43] Mexico comes from natural gas. So the US [26:47] is using Canada and Mexico's export [26:50] markets. And then those two other [26:52] countries are using that cheaper energy [26:54] in order to make competitive products. [26:56] So again, the longer this goes for, the [26:58] more integrated we are and the more [27:00] disruptive trade and investment [27:02] obstacles become. [27:03] Mexico has long recognized its reliance [27:05] on the US for energy. And one way it's [27:08] tried to reduce that dependence is by [27:10] strengthening its own energy sector, but [27:13] progress has been limited. [27:14] Mexico's perspective has changed over [27:16] the years. We had a basically a state [27:20] monopoly on energy production for over [27:22] 70 years. That changed in 2014 when the [27:27] then presidentto administration [27:30] liberalized the energy market. That [27:31] quickly went away when President Laridor [27:33] got elected in 2018 and he reversed the [27:35] liberalizing market reforms. So what [27:37] what he basically did was changing the [27:40] state-owned firms from Mexico CF for [27:42] electricity, PEMX for oil production and [27:45] instead of being uh productive entities, [27:48] they became public entities. And what [27:50] what that did was it created u a [27:53] threshold for electricity production in [27:57] Mexico that needs to come from PEMX and [27:59] CF. Those state-owned firms are the [28:01] biggest causes of friction between the [28:04] US and Mexico when it comes to the [28:05] crossber energy trade. [28:07] So the main complaints are number one [28:10] PMEX and CF Mexico stateowned firms [28:14] getting priority getting more lenient [28:16] treatment compared to US firms investing [28:20] in Mexico. One of the core commitments [28:22] of USMCA is you have to treat everyone [28:24] the same regardless of where the capital [28:26] is coming from. And this constitutional [28:28] amendments that the president Shinyam [28:30] implemented that President Lopezor also [28:33] was pushing for they are giving PEMX and [28:36] CF uh a predominant uh position in [28:40] Mexico's energy market and that's what's [28:42] one of the biggest obstacles that we [28:44] have for the USMCA review. [28:46] It may seem like the US has an upper [28:48] hand in the ongoing trade talks but [28:50] that's less clear when the US has [28:52] something to sell that it needs Mexico [28:54] to buy. When you look at how your [28:56] company is growing, how big a role is [28:58] Mexico going to play? [28:59] You know, geographically, it's a big [29:01] deal. Uh, economically, it's less than [29:03] 10% of the business we have, but we just [29:05] completed a new presidential permit to [29:08] lay another pipeline into Mexico. One of [29:10] the pipelines we didn't mention uh is [29:13] over near uh Eagle Pass, Del Rio. It [29:16] actually delivers natural gas to the [29:18] world's largest brewery. So, if you [29:20] drink Medel beer, our natural gas [29:22] actually boils the water that makes the [29:24] beer. And I think it's very important [29:25] for the border um of of Mexico and also [29:28] for the you know the the continuing [29:30] growth of their economy is to continue [29:32] to support any kind of electricity [29:34] demand or energy that they may need to [29:37] help their economy. So it's very [29:38] important to our business. It's not an [29:40] economic driver necessarily uh in a [29:42] majority way but it's very important to [29:43] us. [29:44] About 1500 miles north of the US Mexico [29:47] border it's a very different story [29:50] but it wasn't always that way. Jatain [29:53] dilva was CEO of the Canada energy [29:55] regulator from 2020 to 2023. [29:58] How would you characterize the energy [30:00] relationship between Canada and the US [30:03] today? [30:03] I think it's mutually beneficial. I mean [30:05] it's uh the Americans are very fortunate [30:07] to be sitting beside a country that has [30:09] such a vast land mass and so few people [30:12] that is blessed with pretty much every [30:14] energy resource there is not just oil [30:16] and gas uh but uranium as well. And so I [30:19] think it's uh very fortunate for the [30:21] United States that we have this [30:23] agreement that has encouraged the [30:25] integration and for Canada of course the [30:26] reverse is true. Having such vast [30:28] quantities of commodities and being a [30:30] middle power and a trading nation to be [30:32] sitting beside the world's largest [30:34] economy is obviously a great advantage. [30:36] And so we're hopeful that any renewed [30:38] trade agreement will continue to allow [30:40] that energy to flow freely across the [30:42] border. [30:43] Do you think that Americans appreciate [30:45] that that it is such a beneficial [30:47] relationship? In my experience, most [30:48] Americans are completely shocked when [30:50] they find out that Canada is their [30:51] largest supplier of energy. They think [30:53] it's Saudi Arabia or a country in the [30:55] Middle East. And so they're often quite [30:56] surprised to find out that 60% of their [30:58] oil exports come from north of the [31:00] border. Um, you know, in my experience, [31:02] Americans just don't think about Canada [31:04] the way Canadians do. Even though the [31:06] energy relationship between the US and [31:08] Canada is a productive one, energy is [31:11] the main reason the US's trade deficit [31:13] with Canada reached about $46 billion in [31:17] 2025. [31:18] NAFTA had an energy chapter or the [31:20] proportionality clause because the NAFTA [31:23] was signed and negotiated not that long [31:25] after the last global energy crisis. So, [31:27] one of the American priorities in that [31:30] negotiation was to ensure access to [31:32] Canada's vast energy resources. And so a [31:35] provision was put in the NAFTA that [31:36] required Canada to sell as much energy [31:38] to the United States on a good day is on [31:40] a bad day. As a result of that, Canada [31:43] built its energy infrastructure north [31:45] south and not east west or west east. So [31:48] if you look at a map of pipelines in [31:50] North America, the overwhelming majority [31:51] from Canada go south into the United [31:54] States, even if they go south around the [31:55] Great Lakes and back up into Canada. And [31:58] so when the US MCA came around, given [32:00] the fact that that infrastructure [32:02] already existed that basically ensured [32:04] the proportionality that and the fact [32:06] that the US had undergone a shale [32:08] revolution meant that the US MCA does [32:10] not have an energy chapter, no [32:12] proportionality clause. And so I think [32:14] the question for many people going [32:15] forward given the state of the global [32:17] energy situation is will the US be [32:20] looking to return to some type of energy [32:22] clause in a renewed USMCA? Do you think [32:24] that Canada is utilizing that leverage [32:26] appropriately in these negotiations or [32:28] could it be doing more uh to kind of [32:30] wield influence as these talks get [32:31] underway? [32:32] I think there was a great debate in [32:34] Canada initially when we went all elbows [32:36] up in terms of the president's uh [32:39] threats towards Canada and the [32:41] imposition of tariffs. You know, what do [32:43] we have that the United States needs [32:44] that we could easily withhold and that [32:46] would cause grief in the American [32:48] economy and hopefully get things back on [32:50] track. I think now though, Canadians [32:52] realize that the better approach is [32:54] demonstrating to the US administration [32:56] that we have the best product out there [32:58] that is helping to make America great [33:00] again. And you've seen this shift in [33:01] tone from our prime minister as well. He [33:04] was recently in the United States and he [33:05] indicated that, you know, a strong [33:06] Canada is what will help to make America [33:08] great again. And so just this [33:10] understanding that there is a high [33:12] degree of commonality that there's lots [33:15] of things that are mutually beneficial [33:17] in this agreement and I think for Canada [33:19] it's looking at that longer term play. [33:21] How does Canada balance its eagerness to [33:24] diversify, [33:26] find more audiences for exports with the [33:28] fact that the US is so critical, so [33:30] important to it. [33:32] Canada is engaged in a game of 3D chess. [33:34] I mean the reality is that the US is a [33:37] hugely important market for us. So more [33:39] than 70% of our exports still go to the [33:41] United States. More than 90% of our [33:42] energy exports. We cannot replace that [33:45] market overnight. And also we know it is [33:47] never smart to just have one customer. [33:49] So we need to diversify our economy and [33:52] certainly that has taken greater [33:53] priority in light of the tone and [33:56] approach of the current administrations. [33:57] It is a very fine balance. [33:59] I'm curious what the energy relationship [34:02] is like between Canada and Mexico. Uh is [34:05] there one to to speak of? There is [34:06] certainly a relationship, you know, as [34:09] uh Mexico is looking to build out its [34:10] energy sector. It looked to to Canadians [34:12] regulations to do that. Uh they look to [34:15] Canada's national energy regulator as [34:17] well as to some provincial energy [34:19] regulators to figure out how they wanted [34:20] to set up their systems. We did also see [34:23] uh you know in the late 90s early 2000s [34:26] actually we saw the major pipeline [34:28] companies here in Canada and TC Energy [34:31] actually made big purchases. uh they [34:33] bought pipeline networks all the way [34:35] through North America and then with the [34:37] changing government in Mexico and the [34:39] approach to nationalizing their energy [34:41] sector some of them pulled out but you [34:43] know there is a lot of uh trade and [34:45] services and expertise that happens [34:47] between Canada and Mexico and the energy [34:49] sector even today [34:51] with energy as a multilateral issue [34:53] where all the parties involved seem to [34:55] benefit many of the industry's players [34:57] agree on one thing that the best outcome [35:00] might be the status quo [35:03] We probably want to make sure that [35:04] energy stays out of the conversation [35:06] because right now the free flow of [35:07] energy that's going on right now is [35:09] helping the economy grow. If their [35:11] economy grows, it helps the US and vice [35:14] versa. So I am interested to make sure [35:16] that energy doesn't become part of the [35:18] conversation. Uh but other than that, [35:20] I'm I'm more interested to understand if [35:22] there's any other economic impacts [35:24] that'll slow the energy use or slow the [35:26] energy growth of Mexico down. Next, the [35:29] best we can hope for and the worst we [35:31] might fear from the USMCA negotiations. [35:34] We talk with former trade negotiators [35:36] from the three countries at the table. [35:44] Negotiations over the USMCA are about [35:47] the sectors most directly involved like [35:49] autos and agriculture and energy, but [35:52] ultimately they're about three [35:53] countries. what they hope to achieve [35:56] from any revisions to the trade [35:57] agreement and what they need to protect. [35:59] For these three perspectives, we welcome [36:01] now Kristen Hillman. She's former [36:04] Canadian ambassador to the United [36:05] States. Heranimo Gutierrez Fernandez, [36:08] former Mexican ambassador to the US, and [36:10] Kellyanne Shaw, former USR general [36:12] counsel now with the Aken Group here in [36:15] Washington. I'll start with you, [36:16] Kirsten, because you were involved in [36:18] the USMCA negotiation. Let me ask the [36:20] really scary question. What is the [36:22] chance we end up with no deal? [36:24] Yeah. Well, I I think the first thing [36:26] and there's a lot of complicated process [36:28] around what's going on right now. I [36:29] think the one thing that's important for [36:31] people to understand is that there is a [36:33] deal and even if on July 1st the parties [36:36] don't agree to renew it, it stays in [36:39] place and we work to find ways to come [36:42] to an agreement on modifications. But [36:44] while we're working on that, the [36:45] agreement stays in place. So I think the [36:48] chances of the deal staying in place are [36:50] very high. then arrangements around the [36:53] modifications. I also think we have a [36:56] very good chance. There's a lot of [36:57] things in particular that USR has said [37:00] they're looking for that I think both [37:01] Canada and Mexico uh can work with. [37:04] Let's ask a different kind of risk [37:05] because I've also seen some people say [37:07] there's a possibility that the US would [37:10] do a deal with Mexico and leave Canada [37:12] out given some of what the prime [37:14] minister of Canada has been saying. Is [37:16] there any prospect for that? [37:18] I think we saw it uh during the first [37:20] USMCA negotiation. We saw you know a [37:23] similar environment and I think the fact [37:25] that we ended up with a trilateral [37:27] agreement uh reflects the fact that it [37:30] is extremely important for North America [37:32] as a region. So, you know, negotiate [37:34] trade negotiations are never easy. Even [37:38] less so nowadays, [37:40] even less so when you have uh sort of a [37:43] contaminated agenda, you know, a very [37:47] complex geopolitical agenda and security [37:49] agenda at the same time going on. But I [37:52] I you know in my view uh there has never [37:56] been a time I think which makes more [37:59] sense [38:01] to continue building up our North [38:04] American economic region and if we add [38:08] security to that given the geopolitical [38:10] context to me makes all the sense in the [38:13] world. Um, nevertheless, to be also [38:16] objective, we have never been, I think, [38:19] in the past 30 years as close as losing [38:23] that opportunity. And that that's in a [38:26] sense that's a shame. [38:27] Kellyan Herano says there's never been a [38:29] time when it's more important to have [38:31] this. Does President Trump agree with [38:33] that? If you listen to his trade [38:35] representative, doesn't always sound [38:36] that way. [38:37] Well, look, I I think the North American [38:39] trading relationship is the biggest [38:41] trading relationship on the planet. It [38:43] is incredibly important. The real [38:45] question is, does President Trump value [38:47] USMCA, this particular trade agreement? [38:50] He's always been skeptical of it. I was [38:52] in the first Trump administration. I was [38:54] there when this agreement concluded, [38:56] when it passed through Congress. He [38:58] thought it was an improvement on NAFTA, [39:00] but insisted on this sunset provision, [39:03] which we're dealing with right now, the [39:05] six-year review, so that it wouldn't be [39:07] like NAFTA where we're stuck with it for [39:09] 25 years and can't do anything about it. [39:11] But I think at the end of the day, [39:12] everybody appreciates how important this [39:15] economy and this North American trading [39:17] system is. [39:17] David, could I just add one thing too [39:19] that I think is important to recognize? [39:20] There's a lot of discussion around [39:21] tariffs, right? Tariffs are a big part [39:23] of the discussion that we've we've had [39:25] since President Trump has come back into [39:27] office. But the USMCA contains all the [39:30] rules on intellectual property [39:31] protection, all the rules on [39:33] agriculture, all the rules on services [39:34] trade, all the rules that deal with how [39:37] we have our customs procedures sort of [39:39] coordinated between the three countries. [39:41] So the agreement is the foundation of [39:44] the integrated nature of our [39:46] relationship. If it goes away, none of [39:49] us are bound by those rules anymore. [39:50] That's why the implications of the [39:52] agreement going away are enormous. I I [39:55] think that when USMCA came into effect [39:59] uh enter into force in 20 it was [40:01] actually seen as the future model [40:04] agreement by the United States. [40:06] I think the fact that it includes a [40:08] provision that we did not have in the [40:11] North American Free Trade Agreement [40:12] which is the possibility of reviewing [40:14] makes all the sense in the world because [40:17] in NAFTA it was sort of you know all or [40:20] nothing. Again I would emphasize that in [40:23] the end it makes USMCA is not perfect [40:27] but it works and uh and I think the past [40:31] six years we have seen that our intra [40:34] regional trade has you know has evolved [40:38] uh favorably. I think that if you ask a [40:41] lot of the industries uh that are [40:44] relevant for North America that they [40:46] would tell you that USMCA is a [40:48] fundamental tool for them in in [40:51] producing together in North America and [40:54] exporting to other regions. [40:56] Kelly, you raised automotive as a really [40:58] important factor here. Always has been [41:01] among these three countries. Uh but I [41:04] think you can't right now discuss [41:06] automotive even more so than six years [41:08] ago without talking about a fourth [41:10] country which is China. [41:11] Yeah. [41:12] And with the the the looming pro [41:14] prospect of Chinese exports of [41:17] automobiles into Canada as well as [41:19] ultimately perhaps the United States. [41:20] Certainly we're seeing it in Europe. So [41:23] to what extent might the Trump [41:24] administration see this renegotiation [41:27] review of USMCA be a way of creating I [41:29] think some of our Canadian friends [41:31] called it fortress North America. [41:33] President Trump was describing it as a [41:35] zero- sum game. He wants the auto [41:37] industry. I want the auto industry. Only [41:38] one of us is going to have it. Now it's [41:41] a negotiation. So we'll see where this [41:43] lands. But I do think that the [41:44] administration wants a very aggressive [41:47] uh change to the rules of origin, which [41:50] would actually also have a domestic [41:52] content requirement, meaning some of [41:53] that car is going to have to be made in [41:55] the United States to qualify for USMCA. [41:58] And almost none of that car should be [42:00] made by any components from China. And [42:03] that's a way not only to bolster the [42:04] domestic industry, but also to protect [42:06] the North American industry from Chinese [42:08] inputs. In in the case of Mexico, I [42:10] think going back to the deficit, I think [42:12] it's important to note again, you know, [42:15] data, which is, you know, around 40% on [42:20] every dollar that is exported from [42:22] Mexico to the United States is actually [42:25] a US compliment. That that's a figure [42:27] that has been there for quite some time. [42:29] So you have to again if you go into the [42:31] nitty-gritty of the deficit I think that [42:34] needs to be taken into account. [42:37] Since USMCA's first negotiation I think [42:40] it became clear that the US wanted to [42:45] capture a bigger chunk of the growth of [42:50] the auto industry into the future and I [42:53] think that is going to be accomplished. [42:55] I hope it does not it is accomplished in [42:58] a way that companies which are really [43:02] North American Ford GM to mention a few [43:06] they operate throughout the Americas [43:08] it's done so in a way that they can [43:11] continue to be competitive worldwide and [43:14] if that addresses the concerns by the [43:16] administration which I think it's [43:18] possible I think we should get to a you [43:20] know a good place uh within a few months [43:23] hopefully or you know certainly within [43:25] the next 12 months. [43:26] You talk about certainty and businesses [43:29] certainly United States, Canada and [43:30] Mexico want just to know what the rules [43:32] are. Uh even more than what the rules [43:34] are specifically just know what they are [43:36] and they stand fast. Uh what are the [43:38] prospects of that right now? Because [43:40] there's also as I understand it under [43:41] the terms of USMCA the possibility of [43:43] like every year you get to redo this [43:45] thing, take another look at it and [43:47] goodness knows President Trump seems to [43:48] enjoy that process. [43:50] Right. Well, I think that if if the [43:53] countries come to an agreement to review [43:57] and then make modifications to USMCA, [44:01] then they have the option of renewing [44:03] it. And if it is renewed, then the next [44:06] review comes up in six years, not one [44:08] year. Uh it sort of extends it for 16 [44:11] years with a another review in six [44:12] years. So, I think that that's the way [44:14] the clause was created. The cause was [44:16] created with the understanding that all [44:18] three parties would come every six years [44:21] and say, "Is it still fit for purpose? [44:23] Do we need to make modifications?" We [44:24] thought that was the right timing for a [44:26] variety of reasons. Um, and I I still [44:28] do. I mean, we all lived with the NAFTA [44:31] that became impossible to modify until [44:35] it wasn't. Until President Trump, and [44:37] you know, to be fair, he went to a place [44:39] that people had not been willing to go [44:42] before, which was to open it up and have [44:43] a good look at it. And that resulted in [44:45] a much more modern agreement that [44:47] resulted in an agreement that was much [44:48] more effective and a mechanism that [44:50] allows us to look at it every six years. [44:51] So ideally I think that you know I think [44:53] we will work Canada will work really [44:55] hard to uh find some kind of solution [44:58] that gives us stability um and then [45:00] we'll look at it again in six years. [45:02] What are the prospects of the result of [45:04] this whenever that happens being [45:06] actually enhanced trade among the three [45:08] countries or is the goal instead just [45:11] not losing what we already have? Is [45:13] there any goal of using this offensively [45:16] to have even more and better trade [45:17] rather than just let's not lose what [45:19] we've got? [45:20] Well, I I tend to think that we actually [45:24] have not seen [45:26] the benefits of USMCA [45:30] for a sufficient long period of time. [45:33] Let me explain why. The agreement went [45:36] into effect in 2020 [45:39] right at the time that COVID hit. [45:42] So [45:44] that was that immediately affected our [45:47] economic business and trade among [45:49] ourselves. [45:51] After that stabilized, you're beginning [45:54] to see in my view a pickup in trade and [45:57] employment thanks [46:00] to that agreement. I think what we're [46:02] going to see is tremendous benefits for [46:05] the three countries. Now again, I'm not [46:07] naive. We're not there yet. And I think [46:10] we're going to see we're seeing our [46:13] trade increase even with tariffs [46:15] nowadays, [46:17] right? We're seeing investment. You [46:20] know, President Trump wants naturally [46:23] every leader wants as much investment [46:25] coming into their country and that's a [46:28] central part of the discussion. The US [46:30] invests around $ 160 billion. That's the [46:34] stock of US foreign direct investment in [46:36] Mexico. Mexico unknown to many Americans [46:39] has about 60. If you normalize that by [46:43] the size of the economy, Mexico is [46:45] actually investing more in the United [46:48] States that in the United States in [46:49] Mexico and there are a lot of Mexican [46:52] companies willing to invest more and I [46:55] think that's the certainty of having you [46:58] know the deal for the next 16 years is [47:01] critical for them and in essentially in [47:04] all sectors even if you talk to the [47:06] agricultural sector here in the states [47:08] they want that certainty also because [47:10] They export billions of dollars of [47:13] grains to Mexico. [47:16] Next, wargaming. The USMCA negotiations [47:19] with those who have done it before. [47:28] With the USMCA, the hope is for the [47:31] United States, Mexico, and Canada to [47:33] come together. But each country has its [47:35] own specific interests and goals that [47:37] will need to be reconciled. and yes, [47:40] compromised. Kristen Hillman did this as [47:43] Canadian ambassador to the United [47:44] States, as did Heranimo Hutierrez [47:46] Fernandez when he was Mexican ambassador [47:49] to Washington and Kelly Anne Shaw as [47:51] general counsel for the United States [47:53] trade representative. [47:55] So, I'm going to ask each of you to put [47:57] your old hats on for Canada, for Mexico, [47:59] for the United States. Going into this, [48:02] give me best case, worst case scenarios [48:05] from Canada's point of view. What's the [48:07] best thing that can come out of this and [48:09] what's the biggest fear? I [48:11] think the best thing that can come out [48:12] of this is that we meet this moment of [48:15] sort of global economic and security [48:17] upheaval in a way that continues to make [48:21] North America as competitive as it [48:23] possibly can be. I think we are at a [48:26] sort of a crossroads where we can be [48:29] sure that we bring our best to the [48:32] region that we are as equipped as we can [48:35] be to face competition from non-market [48:38] economies to face competitions from [48:40] other trading blocks across the world [48:42] because they are working to up their [48:44] game as much as they possibly can and so [48:46] should we. So the best case scenario is [48:48] we find stability and a stability that [48:52] uses the sort of unique characteristics [48:55] of each of our three countries to do the [48:57] best that we can for the whole region. [48:59] Again, as Kelly, we have a we have had [49:01] even in six years an enormous increase [49:05] in our in our productivity as a region. [49:08] We've had a 20% increase in US exports [49:11] to Canada, for example. Um so let's [49:14] build on that. That's best case scenario [49:15] and let's try and do it as quickly as we [49:17] can to give our businesses stability. I [49:19] think the worst case scenario is exactly [49:21] the opposite of that is that we miss the [49:23] moment. We continue to find a shifting [49:28] sands. um we all kind of go off in [49:31] different directions and we as as can be [49:35] expected try and find stability and [49:37] partnerships you know uh around the [49:39] world and we may lose the moment that we [49:42] have here to do the most that we can [49:44] and is Canada's negotiating posture [49:46] affected at all by the so-called middle [49:48] power speech at Davos by Prime Minister [49:51] Carney because that sort of a backdrop [49:53] here of Canada saying you know what we [49:55] got to appeal to other middle powers and [49:57] not worry about the United States or [49:58] China that much. [49:59] I think that there's I think that that I [50:01] think it's a and situation. So, we have, [50:04] you know, we have uh$2.5 billion dollars [50:07] of trade a day with the United States [50:09] and we have a 5,500 mile border and we [50:12] benefit both countries greatly from that [50:15] proximity and that relationship and [50:17] that's not going to change and we would [50:18] never want it to. Um at the same time [50:22] this path of integration that we've been [50:24] on since for Canada 1989 with the Canada [50:26] US FTA uh and then increasing with the [50:29] NAFTA and increasing with the USMCA is [50:32] in a moment of sort of qu some of some [50:35] of the integration and the value of it [50:36] is being questioned. I think that's fair [50:38] to say. Um and so that is something that [50:42] we have to look at from a ser in a [50:45] serious way. Um and so the government is [50:47] doing a few things right there. We're [50:49] doing a lot more at home. We're taking [50:51] charge of ensuring that we're our own [50:53] best customer. Um, and the government is [50:55] also trying to make sure that they have [50:58] resilience in the markets that that our [51:01] businesses serve. And our businesses are [51:04] doing that too because I think that [51:05] while they have very much, you know, [51:07] benefited from this integration and this [51:09] in this uh in this relationship, it has [51:12] been a vulnerability for them in the [51:14] past year at least some sectors. [51:16] And what about for Mexico? Best case, [51:18] worst case, worst fear. F [51:20] first, let me tell you something. I I'm [51:21] I'm a firm believer that, you know, when [51:23] USMCA was ne negotiated, nobody was [51:27] fully happy. And I think that reflects [51:31] that that was the deal to be had. And if [51:34] you if if if in the end you have a deal [51:36] where one of the parties is super happy [51:38] and the other ones are not, you know, [51:40] somebody lost. So my my best scenario [51:44] would be a you know extended USMCA [51:48] within 12 months for another 16 years [51:52] having addressed the different points [51:54] that have been voiced by the Trump [51:56] administration by the Canadian [51:57] administration by our government in a [51:59] way that I'm sure nobody is going to be [52:01] fully satisfied but is satisfied enough [52:04] to move forward as we did six years ago [52:07] and we are we have a very clear regional [52:12] commitment to resiliency in our supply [52:15] chains throughout North America, a [52:18] commitment to working together to [52:20] address a very geopolitical the complex [52:22] geopolitical moment. Uh dealing with the [52:25] strategic competition with China. Mind [52:27] you, Mexico was the last country that [52:30] voted in favor of having China into the [52:33] World Trade Organization and there were [52:35] good reasons for that back in the year [52:36] 2000. And we are also dealing with uh [52:41] you know working together to you know as [52:44] you say address the challenges that are [52:46] coming from other regions. No. And [52:49] finally and this is important I think [52:52] that Mexico will need to up its game on [52:54] security. I think that every every [52:57] country, not only the, you know, North [52:59] American partners, every country that [53:02] wants to have access and do business [53:05] with the United States in the future is [53:08] going to have to be a little bit more [53:10] politically and geopolitically aligned [53:12] with the United States. That's clear. [53:14] We're no longer in the '90s. And that's [53:16] fine. And I think Mexico will show also [53:19] will need to show uh more commitment to [53:22] work in the United States. We are doing [53:25] it to address some of our shared [53:27] security concerns. That's to me the best [53:29] scenario. [53:30] Kelly, I hear hero say it it's worked. [53:33] You know, it can be better. It's worked. [53:36] President Trump first administration [53:38] focused on trade imbalances, trade [53:40] deficits. Has the USMCA really improved [53:44] that situation? Because as I last time I [53:46] checked in goods, there still are [53:48] substantial trade deficits with both [53:50] Canada and Mexico. Yeah, I I think it's [53:52] a great question and no question that [53:54] aspects of USMCA have really worked. [53:57] We've seen trade increase 50% within the [54:00] North American trading block since 2020 [54:02] when the agreement entered into force. [54:04] It's worked for US farmers. It's worked [54:06] for service providers. There are a lot [54:08] of success stories on USMCA. But where [54:11] it hasn't worked happens to be the [54:13] president's northstar, which is the [54:15] trade deficits. And so with Canada, [54:17] we've continued to effectively maintain [54:19] the same trade deficit over the last [54:20] five and a half years. With Mexico, it's [54:23] increased to almost $200 billion. [54:26] That is not sustainable from the [54:28] president's perspective. And whether you [54:30] agree or disagree with him, it is his [54:32] northstar. [54:33] And Kellyanne, finally, the United [54:35] States, I won't ask you to get inside [54:36] President Trump's mind, but if you were [54:39] back at the trade representative office [54:41] and advising as a policy matter, what [54:43] would you advise? This is the best thing [54:45] we can go for and this is what we have [54:46] to make sure we avoid. [54:48] Oh, well, first of all, I want to [54:49] acknowledge as a former trade negotiator [54:51] that having everyone a little bit [54:53] miserable is the most optimal outcome. [54:55] Hopefully, everyone's a little bit happy [54:57] too at the end of the day and and you've [54:58] struck the right deal. No, it it's a [55:00] good question. Look, from the [55:02] administration's perspective, I [55:03] obviously don't uh work for this [55:04] administration at the moment, but [55:06] getting inside the head of of President [55:07] Trump, having us be exactly where we are [55:10] right now, 12 months from now, which is [55:12] the deal exactly as it is in place, no [55:14] changes, would be the worst case [55:16] scenario. Um, the president wants a deal [55:19] that creates a North America that is [55:21] more robust, where we are uh taking on [55:24] China and some of our other geopolitical [55:26] competitors, where we have resilient [55:28] supply chains, where we have a [55:30] competitor and potential adversary who [55:32] can't hit the off button on things that [55:34] we need as North America to survive, and [55:36] one that helps us unleash economic [55:39] growth in throughout North America. that [55:41] marries very well with the president's [55:42] western hemisphere national security [55:45] strategy as well where we're onshoring [55:47] strategic supply chains. And so [55:49] sometimes from the president's [55:50] perspective, I saw this up close, it [55:52] takes a little bit of tough love with [55:53] some of our friends and family to try to [55:55] get them there to the same place where [55:56] the US is. And so I think it will be a [55:59] couple of months of some difficult [56:00] negotiations, but at the end of the day, [56:03] the president wants a fully renegotiated [56:06] USMCA that works not only for the [56:09] American people, but also for the North [56:10] American supply chain. And that's the [56:12] best case scenario. And if we can get [56:14] there in 12 months, we've done something [56:15] right. [56:18] That does it for us here at Wall Street [56:19] Week. I'm David Weston. See you next [56:22] week for more stories of capitalism.