Trump probably won't scrap CUSMA, his trade deal with Canada and Mexico. Here's why

Despite U.S. Chairperson Donald ruff formerly once more flexing his force to scrap his country's free trade deal with Canada and Mexico, there's plenty of reason to doubt he would actually follow through on such a threat.

Trump signed the Canada-U.S.-Mexico Agreement (CUSMA) in his first term and at the time boasted of it as "the most modern, up-to-date, and balanced trade agreement in the history of our country."

This term, Trump has dismissed CUSMA as irrelevant, floated letting it expire and reportedly mused to aides about withdrawing.

On Wednesday, he told reporters at the White House he is "not looking to renew" the agreement when it faces a review on July 1. 

However, "not looking to renew" the deal is not the same as terminating it.

Even without a renewal, the agreement remains in force until 2036. That changes only if a country gives six months formal notice of its intention to withdraw.

Trump threatens not to renew CUSMA trade deal

Canadian and Mexican negotiators have been expecting that the U.S. Would not simply renew CUSMA, but instead would push for changes to the deal at the negotiating table.

Here are five reasons to believe Trump won't rip up CUSMA.

Influential lobby groups representing every major sector of the U.S. Economy are urging the Trump administration to renew CUSMA, or USMCA as it's called south of the border.

This includes manufacturing, the sector that Trump argues will be most reinvigorated by his worldwide tariff regime.

It's crunch time for Canada's trade deal with the U.S. And Mexico

The National Association of Manufacturers published a report in May that heaps effusive praise on CUSMA. The report calls the trade deal "one of President Trump’s signature accomplishments from his first term," and catalogues its record of bringing more jobs, investment and exports to U.S. Factories.

"The USMCA is a pillar for the greatness of manufacturing in the United States," the report says. "We must preserve and strengthen this historic agreement."

At the very moment Trump was threatening not to renew CUSMA on Wednesday, key leaders of the politically powerful agriculture industry were on Capitol Hill praising the trade deal and calling for an extension.

U.S. Agriculture groups launch campaign backing trade deal with Canada, Mexico

The association representing General Motors, Ford and Stellantis calls the deal "the most vital trade agreement for America’s automakers" and is urging the Trump administration to preserve it.

While these and other sectors do want some of CUSMA's terms amended, there are no major industry groups in the U.S. Calling for the deal to be scrapped.

July 1 marks six years since CUSMA took effect, and it's also the date set in the text of the agreement for a formal review by the three countries.

In that review, the options are: A) extending the agreement for another 16 years, or B) reviewing it annually, either until it expires or a deal is reached to extend it.

Canada and Mexico both want option A, and have said they're willing to negotiate tweaks. The White House has not made its position public.

Canada moves to broaden U.S. Trade talks, renew CUSMA

However, the U.S. Has jumped into formal talks with Mexico on renewal, holding one negotiating round in late May, with two more scheduled for next week and late July.

That's being read as a sign of an administration that is more interested in renegotiating the agreement than withdrawing from it.

"The negotiations will focus on ensuring that the USMCA benefits U.S. Manufacturers, farmers, ranchers, workers, and service suppliers, and businesses of all size," said the office of U.S. Trade Representative Jamieson Greer in a news release.

CUSMA is crucial to the Canadian economy because it covers some $1.3 trillion in cross-border trade with the U.S. And shields roughly 90 per cent of Canada's exports from Trump's tariffs.

Although the U.S. Has not entered the same kind of formal negotiations with Canada as it has with Mexico, the top trade officials from each country held fresh online and face-to-face talks over the past few weeks.

Canada tells U.S., Mexico it wants CUSMA renewed

The tone Canada is hearing in its new talks with the White House is far different from the Trump-led antagonism of last year, according to Flavio Volpe, president of the Automotive Parts Manufacturers Association and a member of Ottawa's key advisory committee on Canada-U.S. Relations.

Canada-U.S. Trade Minister Dominic LeBlanc and Canada's chief negotiator Janice Charette met with Greer and his team in Washington last week.

While LeBlanc didn't provide details, he said Canada put proposals on the table to address what he called "long-standing issues that the United States has raised with us."

Carney says more work to do on U.S. Trade talks after negotiators return from Washington

Prime Minister Mark Carney said last week that the number of trade irritants the U.S. Has with Canada is about half as many as it has with Mexico.

Carney is also signalling something of a shift in his own tone toward the U.S., with a speech to a New York business audience pitching the idea that Canada can "help make America great again."

There's an argument to be made that Trump and his Republican Party have enough political troubles on their plate without the economic time-bomb that a notice of withdrawal from CUSMA would almost certainly trigger.

Figures released on Wednesday show the U.S. Inflation rate hit 4.2 per cent in May, the highest it's been in three years.

Trump's approval rating is averaging below 40 per cent, threatening to drag down the Republicans' prospects of maintaining their slim holds on the House and the Senate when the midterms come in November.

U.S. House votes against Trump's tariffs on Canada

A growing number of Republicans in Congress have shown their willingness to oppose Trump when he pushes policies that they believe will hurt their re-election chances.

It's hard to see how tearing up CUSMA would help Trump on any of those fronts.

There's no consistent polling that suggests scrapping the trade deal would be politically popular, nor any solid economic research that suggests it would make the cost of living any cheaper.

Instead there's plenty of research documenting how the U.S. Economy has benefitted from the growth of free trade with Canada and Mexico.

While it's true that Trump can at any moment give six months' notice to withdraw from CUSMA, his threats have not yet gone that far.

On Wednesday, although Trump said what's great about CUSMA is "the right to terminate," he didn't actually threaten to end it.

Talking tough in public is a classic Trump negotiating tactic, says William Pellerin, an international trade lawyer with McMillan LLP in Ottawa.

Here are Canada's biggest points of leverage in tariff and trade talks with the U.S.

Even if Trump does threaten to pull his country out of the agreement, it's far from clear he actually has the power to do so with a stroke of his presidential Sharpie.

"The United States cannot withdraw from a congressionally approved trade agreement without the consent of Congress," concluded the Republican-led Senate Finance Committee in its 2020 report on CUSMA.

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