The Current - Could Mexico and the US cut a side deal on CUSMA?

Episode Date: July 20, 2026

US and Mexican trade officials are meeting this week in Mexico City, and Canadian negotiators are not at the table. We hear from Mexican journalist Eduardo Garcia about what’s at stake for Mexico, and from Goldy Hyder of the Business Council of Canada about how to approach negotiations now that the US says it does not want to extend the agreement as it is now. 

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Hello, I'm Matt Galloway, and this is the current podcast. The three World Cup host nation leaders met at the World Cup final yesterday. They watched Spain beat Argentina in extra time. Mexico's Claudia Shanebaum and Prime Minister Mark Carney joined U.S. President Donald Trump in his viewing box at the stadium in New Jersey. Now, this week, two of those three leaders are meeting to discuss trade. but when Kuzma talks start tomorrow in Mexico City, Canadian officials will not be there. Donald Trump is also threatening to tariff Canada over wildfire smoke.

Now that's on top of broader ongoing frustration with Canada from U.S. officials. U.S. trade representative Jameson Greer has been complaining for months that Canada isn't taking trade talks seriously enough. We just haven't seen a lot of movement. There are a couple things that Canadians have done. You know, they had a digital services tax. They proposed and rolled back. They had an online streaming act where they wanted to force American companies to fund Canadian

companies that they rolled back. I'm glad they did that, but they don't really get credit for doing something bad and then undoing it, right? That's just good practice on their part. Earlier this month, the U.S. said they are not renewing Kusma in its current form. That triggered a clause that will have the three countries reviewing the deal every year for a decade until it expires. It all makes for more trade uncertainty for Canada.

In a moment, we'll hear from the CEO of the Business Council of Canada. But first, I'm joined by Eduardo Garcia. He is a veteran business journalist in Mexico City and host of the podcast, MexMo moves. Eduardo, good morning. Hi, Rebecca. Good morning. Thanks for having me. Of course. How badly are Mexican businesses suffering right now as a result of all of this trade uncertainty? Basically, what Mexico has suffered because of the uncertainty,

it has been much more on the investment side of the equation than the trade side. I mean, Mexican exports have been growing at a quite fast pace. Some sectors have taken over the auto sector, which has suffered the most because of the 25% tariff that Trump imposed on both Canada and Mexican imported cars. But from that perspective, from a trade perspective, Mexico hasn't been hurt that badly. But on the uncertainty side that generates. investment and companies moving to Mexico or expanding, that's where the most impact has been felt here in Mexico. You know, there are some voices in Canada here that have been calling for Canada

to cut Mexico out of the free trade deal altogether. Do you think there's a risk that Mexico may try to do the same thing, especially as Mexico was further ahead in negotiations than Canada is? Well, there's been that talk all around, but I don't think that's overall the case. Mexico would like to have Canada on board. I think the two countries together can join efforts in trying to convince the Americans that the U.S. or Kuzma, as you call it, Temeck in Mexico, it's a good thing for the region in terms of lowering costs, integrating supply chains. So in the Mexican case, I don't think there is any efforts to try to take Canada of the agreement on the contrary. Why is it that Mexico seems to be, as I've mentioned, sort of further ahead on negotiations in Canada is.

Mexico has dates to negotiate Canada does not. What do you make of these two different approaches? I think the Mexican president, Claudia Seymound, has been very cautious in how she deals with President Trump and has made efforts beyond probably beyond her own faculties to try to assure. wage the U.S. problems with the free trade agreement. And so I think that has probably eased the way to try to get the two countries talking. Since the very beginning, since she was sworn two years ago, almost, she has had this priority.

I mean, for both countries, the free trade agreement is crucial, but for Mexico, it's almost a live or dead situation. So they've been put a lot of effort in trying to persuade Americans to continue negotiating. And Mexico has expressed willingness very clearly to try to accommodate to what the U.S. concerns might be. You know, one of the key sticking points between Mexico and the U.S. has been something called transshipment and rules of origin. Just explain to us what exactly that is and why it's such a problem for the U.S. Yeah, the concept of origin is to make sure that whatever gets traded between the three countries,

it's produced in a large extent with North American parts and components. Now, not all of industries have those rules of origin, mainly the auto industry does. And in that case, I think cars have to comply with 70% of its content, value at it with North American produced parts and components or labor, including. But not other industries have those rules. So you might have, let's say, a television that gets produced in Mexico with some Canadian parts and with some other parts and gets shipped to America. And some of those other parts might be coming from China or other Asian countries.

And that generates concern that Mexico might be trans-chipping Chinese. goods that are obviously at a cheaper price to America or even to Canada in some cases. You know, last week, one of Trump's trade advisors, Peter Navarro, put out a video making a number of claims about the Mexican auto industry. Have a listen to what he had to say. Here's what the fake news won't tell you. USMCA was supposed to build North American supply chains. Instead, our auto deficit with Mexico exploded from $92 billion to $130 billion. a year. American parts content in Mexican-built cars cut nearly in half. Why? Because China doesn't need to ship cars to America. It ships batteries, chips and magnets into Mexico, hides them inside

so-called North American vehicles and sneaks them right across our border. What do you make of that claim? Do you think that's true in some part? I mean, I don't know. He has to prove it to make it an actual fact. I don't think so. I think the auto industry is a very integrated industry in the three countries. And if any, I mean, these are US companies that are building cars in Mexico or Canada. And if they are incorporating components that come from China, which they're allowed up to a certain point, then there might be a case to make for what he's complaining about. But I don't think in the other string that's happened, I don't think anybody is, or if anybody is making or confusing labels, if it's a Chinese battery, it probably has a Chinese label on it, but it complies with the rules of origin.

So if there is any issue with that, they should stop it. That's not a pretext to unravel an agreement that from many metrics it has worked for the three countries. You know, of course, now at this point, there's the possibility that the U.S. could just give the six months notice and then pull out of Kusma entirely. How serious of a risk do you think that is at this point? And what would that mean for Mexico? I don't think it's a risk. I don't think it's very serious. I think American companies would be very much against that. They would lose competitive edge against other produce goods from Europe or Asia. he has always had that possibility. It's embedded in the free trade agreement.

But I think there is great concern in America that if he does that, it would punish not just the companies, but consumers as well as it would be increasing prices for goods that Americans buy from Mexico and Canada. So my sense is that there is this risk because they have a very antagonistic view about free trade, but I don't think it will materialize. he would blow up a lot of companies that do produce in three countries.

Okay, Mr. Garcia, thank you for your time this morning. I appreciate it. No, thank you, Rebecca, for having me. Have a great day. You as well. Eduardo Garcia is a veteran business journalist in Mexico City and host of the podcast, Mext Moves. You can also find his newsletter on Substack. It's called Materia Greece. Hi, Steve Patterson here, host of the debaters.

And while I love a funny fight, there's one thing that's not up for debate. The Stratford Festival is one. world-class theater right here in Canada. Whether you're a fan of Shakespeare, musicals, or classics like Death of a Salesman or Waiting for Godot, there's no better time to experience Canadian talent and no better place to see it than the Stratford Festival. So get your tickets now at Stratfordfestable.ca and experience world-class performance the whole family can enjoy. You know, we even tape the debaters there once, so I guess we're world-class now. Uncover is your source for the best in true crime. Home to over 30 critically acclaimed,

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Find and follow, uncover, wherever you get your podcasts. Goldie Hider is president and CEO of the Business Council of Canada, and also joins us now. Good morning. Good morning, Rebecca. You know, I want to start, of course, with Donald Trump threatening Canada over wildfire smoke. He says he'll increase tariffs because of all the smoke that's been wafting into the U.S. What did you think when you saw that? Well, the president says a lot of things.

It doesn't mean he does them. No better example of that than the fact that half the tariffs he's announced have not actually been implemented. So I've always said to people, ignore the noise, stay focused on the process. And if we do that, I think you'll have some cautious optimism at the end. It must be at some point hard to ignore the noise when it's just a barrage. Well, you choose to engage in it. We've not. We have tried our very best as business leaders to work with our trade negotiating teams, with our trade negotiators, with our governments and our respective countries, to drive home a very important message, which is ultimately trade agreements are not, with all due respect about governments or trade negotiators. They're in fact about the conditions in which businesses make decisions to deploy capital that helps employ. citizens of our respective countries. And we're calling on our governments to have a timely

trilateral and tariff-exempt review and renewal of the USMCA for goods that comply, because that is the level of predictability and certainty that is going to be necessary to deploy the capital, something that Eduardo referenced, the consequence of everything right now is somewhat of an investment chill. And unfortunately, in some cases, investment that moves to the United States, not Mexico and Canada, because they happen to be the largest economy in the world. So we've all got to be very conscious of what we're doing to ourselves here in North America. Yeah, you say it's not about the negotiators or governments. However, you know, they are the ones that are sort of trying to hammer out this deal.

And in fact, negotiators from Canada are not at the table in Mexico City this week. Is that concerning to you? Look, I'm not, I don't believe that to be true because I'm speaking with those negotiators. I think there's a lot being said publicly that isn't necessarily factually accurate. there are conversations taking place at the trade level. There are discussions that continue to happen, despite what gets reported. The president and the prime minister have a pretty good rapport.

They can have some pretty candid conversations. Ultimately, any agreement that is going to be reached is going to have to happen at that level. We heard Ambassador Greer just say that recently, that ultimately will be the president and the prime minister that will decide on the Canada-U.S. portion, obviously, President Scheinbaum for the Mexico portion. But the process, it says,

continues. And yes, there's no question that, you know, the United States has been quite seized with the Mexico piece of this because there are far more significant issues and a longer list of issues that they've had to work through, whereas in Canada, it's a more refined list, and we're making progress on that to the best of my knowledge. It's not perfect. But we're working our way towards the other end of this field here. So we don't have any dates because it's not as big as a deal. I mean, that's an optimistic way of looking at it, I suppose. Well, I think, look, the reality is the government has a lot on its plate here, right?

On the one hand, we have to acknowledge the harm that's being done by the two, three, two tariffs to specific sectors. But at the same time, the government has a fiduciary duty to the whole of the economy. And we heard Governor Macklin point out that part of the reason for the resilience of our economy is the fact that the United States continues to consume a lot of things that Canada makes from our energy to our critical minerals to our potash, uranium, agricultural products. and we continue to make cars together. So there's a lot of reasons to underscore the importance of having the supply chain integrity in our economy here. And we have to continue to make that case, particularly as the Prime Minister gets ready to host a summit here to make the case that Canada is investable again.

These are the things that are going to be available. There's no question that in the backdrop of all that conversation, many investors will continue to be asking, how are things going on the review and renewal of the USMCA? So making progress on that front, I think, is a priority for our government, and they're certainly working towards it from what I know. Yeah. Speaking of making the case, I know you have a good relationship with U.S. ambassador to Canada, Pete Hoekstra. What are you trying to convince him of? The things that you think, you know, make Kuzma mutually beneficial in a way that the officials on the other side will understand. Yeah, I think our challenge has been that we're no longer just talking about trade. It's almost become a holistic conversation around security issues like the gold.

and dome or the purchasing of the F-35s, ongoing irritants such as liquor and so forth, our message to the ambassador, but more broadly to the United States, has been, listen, we've done a number of things, we've removed the counterteriffs, we've removed the DST, we've done the online streaming, we've committed to NATO, but no more concessions. And let me be clear, I think the business community overall agrees with our government's position now, which is it's time to go to the table, it's time to find a conclusion to this agreement, so that we're not trapped up in doing more concessions and not getting anything back, because that'll only hurt the public perception and the public issues,

which are already quite hardened. And I think with all due respect to Canadians, we've got to recognize that geography determines trade. Our economy is very strongly intertwined. None of this means don't diversify. Of course diversify. Large Canadian businesses have been doing that for decades, if not over 150 years. But we've got to get the rest of the Canadian economy thinking about that diversification, that can only be done, Rebecca, if we buy the time necessary to build that infrastructure that we need to expand our ports, to build our rail, to build our highways, etc. So in the short term, getting this agreement done is imperative for our Canadian economy, but it obviously has to be a deal that works for all sides. We cannot have one side wins and the other

two lose. That's unacceptable. You've said no more concessions, but we have heard repeatedly from the U.S. that it wants more concessions. So, I mean, it's nice to have what you want and say, you want it. But yeah, what do you do when the other side is not willing? That's the impasse, right? And I think that's the reason we have this log jam. And as Ambassador Greer himself has said publicly and said to us privately, we think we can work through the technical issues that are there. Largely, by the way, to re-clify the agreement of what took place five and a half, six years ago so that, you know, the rules of origin, as you mentioned, and other issues that the Americans feel aren't being applied the way

that they thought this agreement was, we can get through that. But ultimately what we need is that leadership at the very top, the political solution, the political will on all three sides to be able to get a deal done. And one that works for everyone. No one is encouraging anybody to sign a bad deal because, of course, that will have a negative consequence on investment decisions as well. Canada's lead negotiator, Janice Charette, has said there's talk of adding bilateral measures to Kuzma that the U.S. and Canada might work out some details separately with the U.S.

What do you make of that idea? I think there's a reason for that. First of all, I think the idea is that we'll basically tack on to the existing agreements, quote-unquote, protocols, the word that the ambassador Greer uses, where the agreements that are being reached with Mexico and Canada on issues that are very independent. They're not the same issues that the two countries are talking about, which is why bilateral discussions are happening. If you add them onto the USMCA, then there's some reason to believe that, you know, the

administration wouldn't have to go to Congress. to get that deal re-approved. So if that's a way around that, they may be thinking in that way. I don't know. What I can say is that business leaders continue to hammer home that point about timely trilateral and tariff exempt, because until then, the uncertainty is going to weigh heavily on investment decisions. And there's a whole world out there in which capital can flow. And we want to make sure that the advantage North America has remains. And it remains because of the integrity of the trilateral supply chains that have been built over decades. You know, there are certainly some irritants, and we've heard Representative Mike Thompson talk about provincial bands on American booze and they're not moving the needle with the Trump administration.

Pete Hookster also talking about those bands as well. I mean, what sort of leverage does that give Canada at all, do you think? And what other cards might we be playing? Look, the booze thing is small potatoes in the big screen, the big scheme of things. It is clearly, you know, something that Canadians have latched on to. There are some out there who feel we made our point. booze back on the shelves. Canadians can use their judgment as to whether to buy that booze or not. But the reality is I don't think anyone is now saying continue to give

things without getting something back. And I think the conversations that are happening at the executive level of President, Prime Minister, are much more serious than that. They're about national security issues like the Golden Dome, like the F-35s, like NORAD. These are things that are linked to the relationship with the United States. They're not trade-specific issues. But as you can tell with the United States as approach, they're looking at this as a chance to really reset and recast the relationship that they're having with the world and we're caught up with that. But there's no more important relationship to the United States in terms of national security than Canada. And so I expect that those issues will be the reasons that we can get through

this logjam and hopefully address the trade issues along the way, some of which are complicated, like the root of origin issue. But we'll get there. And we have to be cautious. We only have about 30 seconds left. But I am curious. Are you? Are you concerned at all that the U.S. could pull out of Kuzma with giving six months notice? Is that a big risk, do you think, at this point? Short answer is no, never have been. And if they were to do it, they would have done it a long time ago. Okay.

Goldie Hider, we'll leave it there. Thank you very much for this. Thanks for having me. Goldie Hider is president and CEO of the Business Council of Canada. You've been listening to the current podcast. My name is Matt Galloway. Thanks for listening. I'll talk to you soon.

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