The details of what Trump announces today on USMCA will be key

US Commerce Sec Howard Lutnick announced that Canadian and Mexican tariffs will be removed today on ‘USMCA compliant’ goods but exactly what that means isn’t clear.

As Brian Platt at Bloomberg highlights, that pact covers virtually everything that crosses the border but some exporters use other paperwork practices because that’s easier.

Important to keep in mind today: the USMCA theoretically covers nearly all goods traded between Canada and US. In practice, a large numbers of exporters both in US and Canada don’t use USMCA process because it adds a lot of complexities (parts of origin rules, wage rules, etc). Instead these exporters take advantage of the low-tariff environment even outside of USMCA. Most goods in Canada/US trade have very low tariffs under Most Favored Nation rules. Until now of course.

Can most Canadian exporters shift to using USMCA? What I’ve heard from sources is probably, but it will cost time, money and productivity. Trudeau has also made it clear he does not intend to fully lift Canada’s retaliation package unless all US tariffs are lifted.

In Trump’s announcement about lifting tariffs he said “anything that falls under the USMCA Agreement” which hints that it’s all the goods that are listed in the agreement, regardless of what paperwork is used. Ultimately, I don’t think it really matters as the paperwork surely can’t be that onerous.

Update: Scheinbaum said ‘practically all’ trade we have with the USA is under USMCA. I don’t think there is a real concern here about the technicalities.

Of course, this all going to be renegotiated starting in July 2026 with the USMCA and the call between the two yesterday highlighted some of the battlegrounds.

“Trump also laid out a lengthy list of trade irritants. They included
Canada’s value-added sales taxes, digital services tax and its
protections for dairy farmers, speaking at length about Canada’s tariff
protections for its supply-managed dairy sector which controls
production and pricing in Canada and levies tariffs against foreign
imports. The U.S. won a certain amount of access to Canada’s small dairy
market under the renegotiated NAFTA in 2018, yet it continues to be a
complaint of Trump’s. But Trump did not raise another long-running
complaint, that Canada doesn’t spend enough on defence, the Canadian
official said.”

This article was written by Adam Button at www.forexlive.com.