On November 30, 2018, Canada, Mexico, and the United States signed an agreement renegotiating the North American Free Trade Agreement (NAFTA). By the spring of 2020, all three countries had approved this agreement—known in the United States as the United States-Mexico-Canada Agreement (USMCA)Footnote 1—through their respective domestic ratification processes. The USMCA entered into force on July 1, 2020, amid extended U.S.-Mexico and U.S.-Canada border restrictions due to the COVID-19 pandemic. On August 6, 2020, President Trump imposed tariffs on Canadian aluminum—tariffs that his administration had previously put in place in 2018 but had removed in 2019 in order to smooth the USMCA's path to ratification.
The negotiation of the USMCA took place over the first two years of the Trump administration. The agreement, signed on November 30, 2018, changed some of NAFTA's key provisions, including eliminating investor-state dispute settlement between the United States and Canada and modifying the rules of origin for automobiles.Footnote 2 The USMCA also added new provisions “address[ing] intellectual property rights, rights for indigenous persons, rules for trade negotiations with non-market countries, and the agreement's termination.”Footnote 3
The USMCA did not resolve the steel and aluminum tariffs that the Trump administration had imposed on Canada and Mexico earlier in 2018 (or the retaliatory tariffs imposed by Canada and Mexico). On May 17, 2019, the United States agreed with these two countries to lift these tariffs, though providing for possible reimposition if steel or aluminum imports “surge meaningfully beyond historic volumes of trade over a period of time.”Footnote 4 These developments reportedly removed a significant political obstacle to the ratification of the USMCA.Footnote 5
On June 19, 2019, Mexico became the first country to receive legislative approval for the USMCA.Footnote 6 The path in the United States was not as easy, and the U.S. House of Representatives successfully insisted on modifications to certain USMCA provisions, including “strengthen[ing] compliance mechanisms for the labor and environmental provisions [and] reduc[ing] intellectual property protections for certain kinds of pharmaceuticals.”Footnote 7 On December 12, Mexico's Senate once more approved the USMCA, as renegotiated.Footnote 8 On December 19, 2019, and January 16, 2020, respectively, the U.S. House of Representatives and Senate approved the revised USMCA through the passage of the United States-Mexico-Canada Agreement Implementation Act, which Trump signed into law on January 29.Footnote 9 Canada's legislature gave its approval on March 13, 2020, just before taking an extended pause in light of the COVID-19 pandemic.Footnote 10
In April of 2020, the three countries formally notified each other that they had “completed the internal procedures required for the entry into force” of the USMCA and its associated protocol.Footnote 11 Pursuant to this protocol, the USMCA entered into force on July 1, 2020, on the “first day of the third month following the last notification.”Footnote 12 This entry into force had the effect of “supersed[ing] the NAFTA, without prejudice to those provisions set forth in the USMCA that refer to provisions of the NAFTA,” and of terminating the 1993 North American Agreement on Labor Cooperation.Footnote 13
The USMCA's entry into force occurred amid the COVID-19 pandemic. Travel across both the U.S.-Mexico and the U.S.-Canada border has been limited since March 21, 2020, although these limits on “non-essential” travel are not aimed at critical goods or supply chains.Footnote 14 It remains to be seen whether or how the entry into force of the USMCA will affect the economic situation of the three countries amid the pandemic.Footnote 15 On July 8, 2020, Trump and Mexican President Andrés Manuel López Obrador released a joint statement highlighting the USMCA's role as an “ideal instrument to provide economic certainty and increased confidence to our countries, which will be critical to the recovery that has begun in both of our nations.”Footnote 16
On August 6, Trump reimposed a 10 percent tariff on certain aluminum products imported from Canada.Footnote 17 Trump stated that the 2019 understanding reached with Canada lifting the prior tariffs had sought to “avoid import surges” but that, in the year immediately following this agreement, imports on these aluminum products “increased 87 percent compared to the prior twelve-month period and exceeded the volume of any full calendar year in the previous decade.”Footnote 18 Canada's Deputy Prime Minister Chrystia Freeland responded by describing these tariffs as “unwarranted and unacceptable,” noting that “[i]n the time of a global pandemic and an economic crisis, the last thing Canadian and American workers need is new tariffs.”Footnote 19 She stated that “with the new NAFTA having come into force on July 1st, now is the time to advance North American economic competitiveness—not hinder it,” and promised that Canada would “swiftly impose dollar-for-dollar countermeasures.”Footnote 20