U.S. President Donald Trump's administration is reportedly pushing for significant changes to the Canada-United States-Mexico Agreement (CUSMA), specifically targeting auto rules of origin. Mexican officials are currently evaluating a U.S. proposal that would increase the required North American parts threshold from 75% to 82% and, more controversially, mandate that 50% of all components originate specifically in the United States. These changes could force a major restructuring of North America's tightly integrated auto supply chains.
Bilateral Talks Advance, Canada Sidelined
Trade negotiations between the U.S. and Mexico have been progressing, but Canada has been notably absent from formal technical talks in recent months. Despite ongoing backchannel conversations, Canada's exclusion has raised concerns among trade watchers. Canada-U.S. Trade Minister Dominic LeBlanc visited Washington on Tuesday to meet with his chief negotiator, Janice Charette, and U.S. Trade Representative Jamieson Greer. LeBlanc expressed optimism about a trilateral resolution, stating, "I remain optimistic that there will be a conclusion by all three parties — that the economic interest of North America is served by committing to what Ambassador Greer has previously, publicly referred to as the load-bearing walls of their trade relationship with Canada and Mexico."
Risk of Exclusion Looms
LeBlanc downplayed concerns about the rules-of-origin proposal, expressing confidence that Canada will have conversations with both the U.S. and Mexico on such important changes. However, some trade experts fear that if the American and Mexican trade teams reach a bilateral agreement, Canada may be pressured to accept that framework or risk exclusion. This approach mirrors the strategy used during the original CUSMA negotiations in 2018.
"It is clear the Trump administration is trying to drive a wedge between Canada and Mexico," said Andrew Hale, a fellow at Advancing American Freedom in Washington. "The countries should be negotiating trilaterally given that this is a trilateral free trade agreement." Carlo Dade, director of international policy at the University of Calgary's School of Public Policy, agreed but noted that the outcome depends on Canada. "The Americans have forced their hand to make that choice. So the way this will logically read is that the Americans concluded negotiations with the easier of the two partners, and it's now turning to the third partner to sign on," he said.
Mexico's Role and Next Steps
Mexico's trade team is scheduled to return to Washington for continued bilateral negotiations in mid-June. Hale urged Mexico to reject the proposal, calling it "unfair" and "counterproductive to the long-term integration of the North American supply chains." The outcome of these talks will have significant implications for Canada, particularly in key sectors like automotive manufacturing.
