While all eyes are on the aftermath of the Venezuela strike, the Administration’s trade agenda continues to take shape. The start of 2026 brings a particular focus on the mandated six-year review of United States-Mexico-Canada Agreement (USMCA) due July 1, as well as the impending Supreme Court (SCOTUS) decision on the President’s authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). Below is our latest trade update which touches on many of these topics. Please reach out with any questions.
IEEPA Decision. SCOTUS opinions are generally released at 10am during the Court’s argument weeks. Additional opinion days are added as needed, but usually not until late in the term when the Court clears its docket. That said, the Court did just add this Friday as an opinion day, so that bears watching.
The Court’s scheduled argument weeks-with the addition of this Friday-are listed below through February. All would seem possible candidates for the IEEPA ruling, though not exclusive:
- Friday, January 9
- Week of January 12
- Week of January 19
- Week of February 23
USMCA Review. Ambassador Jamieson Greer’s opening statement and oral report to the congressional trade committees in December acts as his official report to Congress as mandated under the statute from the Administration’s perspective. The opening statement highlights a number of areas of concern (“shortcomings”) and potential remedies with respect to each country (bilateral)-and between all three countries (trilateral). The bicameral shortcomings and areas for trilateral collaboration include:
- Canada: Online Streaming Act (and digital service trade restrictions), restrictions on market access for U.S. dairy, regulatory imbalances with Canadian fishers in the “Gray Zone,” provincial bans on U.S. beverage alcohol, discriminatory procurement measures, complicated customs registration, electrical power treatment of Montana
- Mexico: labor law enforcement, customs facilitation, renationalization of the energy sector (e.g., Vulcan Materials theft/lack of compensation), overcapacity (i.e., investment from non-market economies), seasonal produce, environmental law enforcement, EU meat and cheese terms, spectrum use fees, electronic payment services
- Trilateral: country-of-origin labeling and rules of origin, economic security alignment (e.g., tariffs, export controls, investment screening), offshoring of U.S. production for regulatory/tariff arbitrage, critical minerals development, forced labor import bans
While Ambassador Greer called the agreement “successful to a certain degree” he emphasized that its “shortcomings are such that a rubberstamp of the Agreement is not in the national interest.”
The Ambassador did, however, note progress to date, particularly with respect to Mexico. Greer’s follow-on op-ed in the Financial Times is included here, which lays out the case for the Administration’s USMCA strategy and how it fits into the overall trade agenda.
Mexico/Venezuela. President Claudia Sheinbaum’s official comments following the Saturday incursion were particularly pointed. She called U.S. action “categorically unacceptable” and a “clear violation of Article 2 of the United Nations Charter.”
In response to Sheinbaum warning against a potential U.S. military incursion into Mexico, Trump told reporters earlier this week, “She [Sheinbaum] doesn’t run Mexico. The cartels do… We’re going to have to do something.” Despite this escalation of words, Trump reemphasized that Sheinbaum is a “terrific person,” again signaling a uniquely friendly relationship between the two.
While media and international establishment opinion has been similarly critical of President Trump’s Venezuela decision, there are two noteworthy views worth reading:
- The WSJ Editorial Board, which is increasingly no friend of President Trump, laid out the case for how Article 2 of the UN Charter has been abused and distorted to protect autocracies throughout the world (link).
- Yesterday, the Director of the America First Policy Institute‘s (AFPI) Western Hemisphere Initiative-an organization close to the President-took a decidedly hard line against Sheinbaum and her Morena party, linking them directly to the region’s autocracies and cartels (link).
These two opinions are harbingers of a potential upcoming rough patch with the Mexicans. Worst case, the U.S. could conduct a military strike against cartels inside Mexico. More likely, the President will use rhetoric to pressure Sheinbaum, including the threat of withdrawing from the USMCA. We continue to rate the risk of unilateral withdrawal as relatively low this year, however, given affordability and mid-term election sensitivities in the U.S.
Implications of the Venezuela strike do not solely extend to the U.S. relationship with Mexico, the risk of USMCA withdrawal, or the expansion of U.S. oil and gas in the region. All of Latin America is now on heightened notice and has been divided into two camps: supportive (conservative governments) and opposed (liberal governments). In the latter camp are those nations that face a high risk of incursion or economic instability themselves, most notably Colombia and Cuba.
But as always, there are nuances. Yesterday, the President spoke with Colombian President Gustavo Petro, posting on Truth Social that the tone was positive and announcing a future meeting between the two in Washington.
Moreover, the economics of the Venezuela strike are not simply limited to U.S. oil and gas. Secretary of State Marco Rubio has planned much broader economic cooperation and stabilization between the two as highlighted in the President’s post late yesterday announcing that Venezuela will limit foreign purchases to American products, including U.S. agriculture, medical supplies, and heavy infrastructure equipment.
Global Implications. The “Donroe Doctrine” is as much about Western Hemispheric security as it is about combatting China, Iran, and Russia. Those nations’ interest in the Latin American region is without question, dating back to the end of WWII. But since China’s entrance into the World Trade Organization (WTO) and Putin’s takeover of Russia, those countries’ economic influence in the region has rapidly risen.
As a result, we are seeing in real-time the direct effects of the Trump Administration shifting U.S. national security strategy to confront these nations and their influence in the region (e.g., Argentina, Brazil, Guyana, Panama). Seizing ships, enforcing oil blockades, and potentially claiming in-country property is all on the table and cuts off a key source of trade and resources for China and Russia, in particular.
Add in the Iranian protests, U.S. trade agreements throughout Asia, the recent Taiwan arms sales, India’s paring back of Russian oil purchases, and the ongoing conflict in Ukraine, pressure points accentuated by the military strike in Venezuela could spill over into the agreement reached between President Trump and President Xi in October. Progress on metrics between the two has been steady thus far, but the weekend’s strike will add some doubt into its year-long durability and could affect President Trump’s scheduled visit to Beijing this spring.
OUTLOOK/ANALYSIS. If there were any doubts last year about the Administration’s commitment to a Western Hemispheric focus, those were fully dispelled over the weekend. The President will remain active, of course, in global geopolitics quickly moving from one conflict to the next. But the Trump Administration has effectively shifted U.S. national security policy to the Americas. This will put increasing pressure and urgency on the review of USMCA during Q1 and Q2 and have spill-over consequences for U.S. leverage vis-à-vis China, Iran, and Russia. In the meantime, we expect the Administration’s reciprocal negotiations to continue with agreements expected in the near term with India and Indonesia, in particular. Regardless of the outcome of the IEEPA tariffs, the Trump trade agenda will continue to gain momentum this calendar year and the congressional role will remain limited.
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