Trade news continues to dominate the headlines from both a geopolitical and economic perspective. Congress remains sidelined by the Administration, but played host to USTR Ambassador Jamieson Greer this week and also heard from Commerce Secretary Howard Lutnick on Section 232 tariffs this morning.
One overlapping aspect of trade and policy that Congress will have a hand in is housing affordability. Given the effect of tariff and immigration policy on housing costs, Congress could tangentially weigh in with relevant housing policy that touches on trade in the coming months.
What remains to be seen, however, is what role Congress will play in a renegotiated United States-Mexico-Canada Agreement (USMCA). Will they be required to approve new deal terms or will the Administration insist on authority to go it alone? Below is an update on the timeline for USMCA, as well as issues raised in this week’s briefings with Ambassador Greer.
USMCA Key Dates
Entered into force on July 1, 2020, Article 34.7 of the USMCA requires that the three trading partners conduct a six-year review. Below is the relevant timeline for review:
- September 17 USTR initiated public comments via Federal Register Notice (FRN)
- November 3 FRN public comment period closed
- December 3-5 USTR public hearings held
- January 2, 2026 USTR report due to Congress (completed this week)
- July 1, 2026 Six-year joint review deadline*
- July 1, 2036 Expiration of the 10-year sunset window
*Assuming the agreement is not reaffirmed or renegotiated by July 1, USMCA will still remain in place as is until sunsetting in 2036, with annual joint reviews taking place each year. Importantly, however, any party may withdraw from the agreement at any time with written notice. Withdrawal takes effect six months after the date that written notice is provided.
While staff and representatives from each country continue to hold discussions, the relationship between the principals is perhaps most important. With that in mind, it is objectively clear that Mexican President Claudia Sheinbaum retains a more favorable relationship with President Trump than Canadian Prime Minister Mark Carney. Though it is worth noting that Carney’s relationship with Trump is improved as compared to that of former Prime Minister Justin Trudeau (e.g., President Trump has largely quieted his jocular “51st state” comments).
Acting in favor of the agreement being reaffirmed and bolstered is President Trump’s dual goal of global trade realignment and consumer affordability. On both points, the President is incentivized to strike a deal that further solidifies the formidability of a North American trading bloc to compete with China, on- or near-shore manufacturing and critical supply chains, and bring costs down for American consumers.
To that end, we have already seen tariff exemptions for USMCA-compliant goods. Mexico’s Congress, meanwhile, is moving ahead with President Sheinbaum’s proposed tariffs on China, likely at the encouragement of the White House. Mexican officials are hopeful that enactment of the tariffs against the PRC will lead to relief from the Administration’s Section 232 steel and aluminum tariffs (note Commerce briefed Way & Means this morning).
USTR Report to Congress
This week, USTR Ambassador Greer has been engaged in meetings with both the House Ways and Means Committee and the Senate Finance Committee. Greer believes these 90-minute briefings satisfy the statutory congressional reporting requirement contained in USMCA. Below are some of the more high-profile issues Greer touched on during his bicameral meetings this week:
- Unilateral Withdrawal. Given previous comments by Greer and President Trump’s propensity to disrupt negotiations as a leverage tactic, Members asked the Ambassador about the likelihood of unilateral withdrawal from USMCA prior to the July 1 review deadline. Ambassador Greer told Members that while the threat remains, actually dissolving the agreement remains highly unlikely. What is far more likely is that the agreement will be split into two bilateral agreements.
- Status of Talks. Greer told Members that no text currently exists with either Canada or Mexico. The Ambassador did say that he would like to resolve the more high-profile issues between the countries first and prior to July 1. Those mentioned include rule of origin, dumping, dairy, and ag. That said, Greer remains clear-eyed about the compressed timeline and the unlikelihood of resolving all issues prior to July 1. Instead, talks are likely to continue well after the soft deadline. Two topics that Greer did raise as being all but settled are Canada’s rollback of its proposed digital services tax (DST) and the demand that Canada overturn the provincial bans on U.S. beverage alcohol sales. Without that change, there will be no agreement with Canada.
- Affordability. Democratic Members were particularly focused on the impact of tariffs on consumer prices and use of IEEPA for the purposes of tariffs being unconstitutional. The latter, of course, will be decided soon enough by the Supreme Court. Ambassador Greer mainly sidestepped the issue, not committing to specific exemptions or the consumer price pressure of tariffs. Given today’s November CPI reading of 2.7 percent and NEC Director Kevin Hassett’s interpretation of the data, the Administration is likely to be buoyed by the notion that despite its tariffs (and the doomsday prognostications of many economists), inflation remains relatively stable, equities continue to rise, and energy costs are down. Moreover, the President will have his preferred Federal Reserve chairman in place by Q2 and tax refunds (combined with implementation of the OBBBA) are expected to be robust. In other words, we expect the Administration to largely stay the course on its trade and tariff agenda, though individual issues will continue to pop up and be dealt with as one-offs (e.g., beef).
The Administration continues to keep Congress at arm’s length in its overall trade negotiations. Unlike reciprocal tariffs, Section 301 investigations, and Section 232 tariffs, however, USMCA will require approval by Congress should material changes be made.
That said, the Administration believes it has full control over USMCA and that consultation with Congress on the elements of a deal will continue to be an afterthought. How far the Administration can push this concept on what qualifies as needing congressional approval and what does not remains to be seen. But at this moment, they seem to believe they can act unilaterally.
Ultimately, the timing of a final agreement will matter most. How far do these renegotiations stretch beyond July 1-months or years? And what is the composition of Congress at that time-unified Republican control or divided government? Those answers will play a large role in determining Congress’s role at the end of the day.
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