July 21, 2024
What happens if U.S. Congress fails to pass the new NAFTA deal?
The consequences for Canada could be bad—very bad, say experts. But not every scenario is bleak.
The consequences for Canada could be bad—very bad, say experts. But not every scenario is bleak.

The White House is starting to refer to it as “Plan B.”

After 15 months of trilateral trade negations amid threats from President Trump that he’d terminate NAFTA—“the worst trade deal in the history of America,” as he’d say—three countries finally reached an agreement in late 2018 on the framework for a new deal. It had a new name: the United States-Mexico-Canada Agreement (USMCA), sometimes referred to as NAFTA 2.0. Or, as Canadian officials attempted to style it, CUSMA.

Then, not long after the three country’s leaders proudly announced the USMCA, U.S. Democrats won back a majority in the House of Representatives and Speaker Nancy Pelosi opposed bringing the trade deal before Congress for a vote until her party could force some changes to the deal.

Canada, though, refused to open up talks after the fact to appease Dems. The White House was equally set against the idea. So while the USMCA framework remains in place, its future is now very much limbo.

Here comes Plan B.

“Your real two Plan Bs are either NAFTA or withdraw from NAFTA,” said Mike Mulvaney, the White House’s acting chief of staff, at last week’s Milken Institute Global Conference in Beverly Hills, Calif.

The former option means the status quo—business as usual under the deal that so offended Trump. The latter, if Trump followed through on his withdrawal threats, would put immense pressure back on House Democrats to sign the updated deal or risk many of America’s businesses suffering from widespread uncertainty over cross-border trade.

Unlike previous threats from Trump to withdraw from NAFTA, this time Canada would have little, if any, ability to influence the White House’s decision.

In any case, if the Democrats do opt to kill the USMCA—or let it die on the vine—much for Canada hangs on the way things play out from there. So what are the likely scenarios?

[Interesting Read]

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