This transcript was generated using AI automation and may contain minor formatting or transcription errors. Please refer to the original audio to verify specific quotes or context.

Scott Lincicome: Good afternoon, and welcome to Cato. I’m Scott Lincicome, Vice President of General Economics and Trade here, and I wanna thank everyone for joining us today for what promises to be a timely and important conversation.

We titled this event Win-Win Trade in North America, and we chose this framing because frankly, if you followed the news or listened to a lot of folks in Washington, you’d probably think that the US-Mexico-Canada Agreement, and the NAFTA before it, has been a win for literally no one — no less a win for millions of people and businesses in all three countries.

NAFTA has long been a political boogeyman. President Trump, in fact, just said he’d rather not have the USMCA at all — the USMCA he negotiated and signed. There’s been trilateral tariff drama since at least 2018, ramping up in the last 18 months in particular, and the deal’s July 1st review deadline, just one week away, has generated more anxiety than celebration.

So before I introduce our first guest, let me offer a little reality check. Canada and Mexico are now the United States’ top two trading partners, and trilateral trade hit nearly $2 trillion in 2024 alone. That might sound like a lot of trade, and it is, but what’s probably even more impressive is the depth of this engagement.

On a per country basis, USMCA trade volumes dwarf those of comparable European and Asian supply chains. Well over half of US imports from Canada and Mexico are industrial inputs flowing into American factories producing made-in-the-USA stuff. Intra-firm trade between North American affiliates and their US multinational parent companies — especially automakers, but plenty of others too — is also disproportionately high compared to global proxies. USMCA supply chains have evolved over three decades, and today are uniquely, deeply integrated in ways others simply aren’t, and this integration helps to explain why US manufacturing output rises alongside rising imports from USMCA partners.

The agreement is, of course, win-win for agriculture, too. Canada and Mexico together today account for more than a third of all US agricultural exports, and those countries are also critical suppliers of fresh produce, meat, processed foods, and farm inputs like fertilizer. Economists at Purdue estimate that USMCA tariff cuts have reduced American grocery bills by roughly $700 each year. The agreement has also bolstered North American energy, services, and digital trade, with Canada and Mexico being top suppliers and buyers of these things, too. And foreign direct investment has increased substantially since the USMCA took effect in 2020, now totaling hundreds of billions of dollars annually.

Now deep down, the Trump administration actually seems to get all of this. After imposing emergency tariffs on Canada and Mexico last year, the White House almost immediately exempted goods qualifying under USMCA — exemptions that now cover roughly 87% of all Canadian and Mexican imports. The administration has made similar tariff carve-outs for energy, food, fertilizer, and auto parts. Yes, definitely too many US tariffs remain, but it’s still a fact that the agreement President Trump signed, and has since threatened to terminate, has also become the primary way North American supply chains have remained intact. This is not a criticism or critique — it’s actually evidence of this USMCA’s value.

So yes, the agreement is a win-win, and thus the name of our event, and it should be renewed next week. But the agreement’s also not perfect. The joint review process, done right, is an opportunity to fix certain flaws in the text and to address various bilateral irritants. But there’s a very wide gulf between fixing a good agreement and torching it, and it’s clear which side we should all be on.

So with that, let me introduce our first guest, who’s uniquely positioned to address both USMCA’s successes and challenges, as well as the path forward. Representative Adrian Smith of Nebraska’s Third District is the chairman of the House Ways and Means Trade Subcommittee, the committee with direct jurisdiction over US trade agreements. He’s been one of the most consistent congressional champions of USMCA, and open trade more generally, and his leadership on the Agricultural Trade Caucus has made him a go-to voice for many of the issues we’ll talk about today. So with that, please join me in welcoming Congressman Adrian Smith.

Rep. Adrian Smith: Thank you. It’s great to be here with you, and certainly appreciate a thoughtful analysis on all things trade, and ultimately, trade’s impact on consumers.

Scott Lincicome: I really am thrilled you’re here, because you have been one of the most consistent congressional voices on USMCA. So I thought we’d start off with a little bit of a softball for you, because you have been so involved through the original NAFTA renegotiation, through the Biden years, and now into the joint review. So why does this agreement matter so much to you and your constituents?

Rep. Adrian Smith: Well, sure, I appreciate that. You know, representing an agriculture district that is very trade-oriented, we are keenly aware of the benefits of trade overall — that ultimately trade, say, beef alone, is good for consumers of beef, consumers of US beef, especially producers of US beef.

So looking at the shift from NAFTA to USMCA, a lot of folks said that could never get done, and I think really pointing to the fact that it did get done — especially given the environment, a Trump priority during a Pelosi speakership — huge victory for President Trump. He had this as a priority. It got done. Producers have been better for it. Consumers have as well. And so updating that, having a stronger agreement moving forward, I think is the intent of the review ultimately. And we wanna have the discussions we need to have to make sure that enforcement — that’s always key, and is all too often left out of the broader discussions.

So I think there’s a path forward that, you know, strengthening USMCA with Canada and Mexico, doing what they need to do to assure that enforcement is robust, won’t even necessarily require a vote of Congress — that it may or may not be necessary, but there are different paths forward that I think are viable.

Scott Lincicome: Yeah, I wanna get to Congress in just a second, but I think let’s stick to the enforcement theme a bit, ’cause you’ve been critical of various non-tariff barriers imposed by Canada and Mexico. I know there’s talk about rules of origin, potential Chinese content coming in through Mexico and Canada a bit. So I’d love to get your thoughts on where do you think the focus of the renewal negotiations and these discussions will be when it comes to the non-tariff barriers issue in this review, and what trade barriers also can the United States potentially remove to ensure that there actually is give from Canada and Mexico?

Rep. Adrian Smith: Yeah, I think all too often non-tariff trade barriers do not get the attention that they need, and I know there’s a lot of attention given to tariffs — it stands to reason the specificity of tariffs can generate a lot of discussion. But the non-tariff trade barriers oftentimes mean that we can’t ship any product, or just the difficulty. I mean, we’re seeing grain re-inspections — US grain going into Mexico, and the Mexican government says, “Oh, let’s re-inspect that, too much soil there.” That’s really unnecessary.

We had a dispute on biotech white corn with Mexico. They gave us a two-year heads-up. The Biden administration, they kind of, I think, slow-walked their approach and their response. Ultimately, though, we prevailed on seven points because of USMCA, including biotechnology that was different with USMCA compared to NAFTA. Now, the fact that it took two years, even once the panel was formed, I think we can do better than that. I would like to see us pursue that as one of the updates.

But I think there are other areas, too. If Canada and Mexico find our policies problematic, let’s have the discussion. Overall, over history, we’ve been more open than other countries have been, and we are now living in an era where the expectations are higher, coming from us, higher than they’ve been before. And I think it’s reasonable to expect other countries to make some concessions — having the access to our markets that they have, and they need to give us access to theirs.

Scott Lincicome: Yeah, it seems like you could probably get everybody, including me, to agree on things like faster dispute settlement, elimination of non-tariff barriers, which can be, as you said, a huge detriment or restriction on trade flows and something nobody ever talks about. But let’s face it — Mexico, you know, there’s concerns that their version of the IRS is treating American companies differently than their own.

Rep. Adrian Smith: Another non-tariff trade barrier, and it’s hard to draft language that gets at all of that — hard to define, but you know it when you see it.

Scott Lincicome: Right. So, yes, non-tariff barriers, dispute resolution, all very important, but let’s face it, tariffs are important too, right now, especially with US national security tariffs under Section 232 still being applied to a lot of stuff from Canada and Mexico. You’ve publicly said you’re not a fan of tariffs. They increase cost. American farmers have said they’re dealing with tariff-related price hikes for agricultural equipment, fertilizer, and other things. They’re facing some export losses as well, mainly from China, but also some kind of consumer boycott actions in various places. So Canada and Mexico have also said that the 232 tariffs are a priority for them. Where can there be some common ground on these tariffs? Where can there be some give, do you think? Because it seems that — I know President Trump loves tariffs, but you talk to manufacturers, President Trump wants more manufacturing, and the Canadian aluminum tariffs are hurting. You talk to farmers as well. So it seems like everybody deep down maybe can find a resolution here. Do you see any way forward there?

Rep. Adrian Smith: I think a robust conversation needs to take place that I think has been expected. Although what was not expected, with the six-year review, I would say Canada did not expect a Mr. Trump reentering the White House, as he is right now. So they’re gonna have to deal with that, and ultimately that’s a dynamic that — I think obviously the difference between Biden and Trump on trade needs no explanation because it’s so obvious.

So this robust engagement — and again, I’m not a fan of tariffs, but I am a fan of engagement and holding our trading partners to account for opening up their markets. We’ve seen concessions already that I think speak well of what engagement can do. Obviously, with the 301s and the investigations that are now required, that’s moving along, and I know a lot of folks are paying attention to that and eager to see what the outcome is moving forward. But ultimately, I think there’s agreement that fewer trade barriers are better, that we can expect other countries to open up their markets more than they have previously.

Scott Lincicome: Okay, so let’s take one more on tariffs, and then I wanna talk definitely about congressional authority issues. So, the administration has framed its tariffs as somewhat as you just did — really less about the tariffs themselves, more about getting better deals and enforcing those deals. But at the same time, right now we have tariffs hitting goods that should be duty-free under USMCA, which of course President Trump himself negotiated and signed. Does this undermine or does this affect the credibility of the US in the ongoing USMCA negotiations? Does it make trade agreement negotiations harder, not just in the US but elsewhere, if there is this little voice in the back of foreign negotiators’ heads that says, “There still could be tariffs even after you’re done with this”?

Rep. Adrian Smith: Well, I think any executive action throws an issue into the mix that’s temporary. Now, anytime there’s something that’s temporary, that can change the pattern of negotiations, or change a lot of the posture there. So when it comes to the durability of any policy — some countries have even suggested that without a vote of Congress, we won’t get their best offer. And so keeping all of this in mind, but make no mistake, without robust engagement by the executive branch, I don’t think we get very far.

We saw that for four years under President Biden — just wondering what was our trade agenda? And I like to remind folks that there’s no such thing as stagnation in a trade agenda. We’re either gaining ground or we’re losing ground, and for four years we lost ground. Right now, and I say this even not being a fan of tariffs, we’ve been gaining ground — perhaps not in the most elegant manner, but we have been gaining ground, say, with the UK making concessions on beef and ethanol, almost as though it was for Nebraska. But that is definitely a step in the right direction that I don’t think would have ever happened under a Biden strategy.

Scott Lincicome: Got it. Well, great segue to talk about Congress’s role in all of this, because, as you said, in the olden days we used to negotiate trade agreements through the executive branch, and then Congress would codify those into law, and that would provide a lot of consistency, predictability, and durability, and allow for foreign governments to maybe give more than they might do under just an executive branch agreement. You’ve said you want USMCA — it is codified in law — but you would like the negotiations also to be in statute as well, and Congress, of course, has that constitutional authority over tariffs and trade. But I gotta be frank, from the outside, at least, Congress seems to be on the sidelines for USMCA negotiations right now. US Trade Representative Jamieson Greer has hinted that whatever’s gonna be done in these talks is gonna stay away from Congress. Do you think there is a role for Congress here, and do you think Congress has thus far exercised its constitutional authorities sufficiently?

Rep. Adrian Smith: I would short answer yes, because we know that what the executive branch does on their own, like I said, is temporary. So to get to permanent, which I think is more effective and more productive with trade overall, a vote of Congress is necessary. And I’ve indicated to the administration that there’s some opportunities here to codify some of the wins and give some durability to those policies sooner rather than later.

But ultimately, everyone is, I think, well aware of the fact that what the executive branch does right now can be undone by the next presidency, which I can’t imagine would ever be as passive on trade as, say, the Biden administration was. And so for President Trump to codify and get many of those wins for the future, Congress will have to take a vote.

Scott Lincicome: And do you think that tariff authority might be part of codifying these agreements at all? You know, we at Cato have written a lot about how Section 232, Section 301, the rest — let’s face it, there’s a lot of ambiguity in these laws, and maybe some area for Congress to clean up a little bit of that. Do you think that there’s a grander package of sorts, where trade agreements, maybe trade promotion authority, maybe some tariff authority, is there something there for an omnibus or a bigger bill, or is it all gonna be, you think, pretty narrow and piecemeal?

Rep. Adrian Smith: Well, I think we wanna be as specific as we can be. Hard to predict the future — I mean, NAFTA didn’t talk about biotechnology and agriculture because it wasn’t a dynamic, wasn’t a factor at the time NAFTA was passed. So with that renegotiation, ultimately you can update policies with new technologies that exist that can get us to a stronger position and a broader understanding among trading partners. Again, it’s hard to predict the future, but you want language that’s workable, that’s understandable, that’s enforceable. And if we don’t pursue that, I think it’s a missed opportunity, especially as important as enforcement is. ‘Cause you can have everything laid out and codified by Congress, and if it’s not enforced, which is an executive authority, that’s in the executive branch’s lane — that’s a lost opportunity, and there could have been a great deal of pain experienced in getting that language passed, and then it won’t make a difference. That’s a problem.

Scott Lincicome: Right. Yeah, I’ve often pushed back on the idea that trade agreements should be only a page long, by noting that all those details are there to actually make enforcement easier, right? ‘Cause everybody knows what the rules of the game are. Still important for there to be dispute settlement and that kind of stuff, but you actually need those hundreds if not thousands of pages —

Rep. Adrian Smith: Seventeen thousand tariff lines alone.

Scott Lincicome: Right, that’s before you touch any non-tariff trade barriers that tend to be kind of vague and nebulous, sometimes on purpose.

Rep. Adrian Smith: Yeah, but they’re politically motivated so often. And so when we can tee up language and get language in there that is broad enough to give us some leverage in formulating that dispute panel, that’s a good thing, especially when we tend to be targeted by other countries so often.

Scott Lincicome: Right. So I have one more question before we go to an audience question as well, because we are right now — next week is the soft deadline for extending the USMCA by 16 years. It seems like while Canada and Mexico would like that to occur, it probably won’t happen, because the Trump administration would prefer to have these annual reviews. Now, the agreement’s not going anywhere — it’s still gonna be around for at least 10 more years — but we’re gonna go through this annual review process. Now, guys like me will say, “Hey, look, keeping the agreement in place, that’s all fine and good. There’s nothing to really freak out about if we miss this deadline next week.” But there is some uncertainty that is increased because of these annual reviews. Do you, especially with Nebraska being so trade-oriented with agriculture exports as well, do you see any tangible benefits or costs to moving to this annual review process, and to having, say, a 10-year horizon instead of that 16-year horizon?

Rep. Adrian Smith: Well, I think uncertainty can undermine an entire trade agreement. Now, we also know that we want and need some updates from time to time. Now, this review mechanism is new in the trade world, and implementing that moving forward, any certainties that can be delivered, I think, can deliver more positive results from a trade agreement. And I think there’s a path forward to give some certainty and also further opportunities for updating. I mean, the Trump administration proved, against a lot of doubters, that going from NAFTA to USMCA was achieved. Now maybe there’s a process moving forward, a path forward to allow these updates to occur in a more efficient way, while maintaining the certainty of an agreement altogether.

Scott Lincicome: President Trump leaves office in just over two years, so the question is how will he want to prepare, and how does he want to hand over this very important trade dynamic for our country and North America in general, that just doesn’t easily get changed by the next administration, knowing how important President Trump’s trade priorities are. So maybe we get a couple years of annual reviews and then a big extension — something like that, right as President Trump’s leaving office, to kind of cement his legacy. Is that what you’re thinking?

Rep. Adrian Smith: Hard to say right now. But I think, you know, as long-term as we can responsibly achieve, so that those understandings are there. I mean, the dispute with Mexico on biotechnology — their announcement that undermined USMCA was almost immediate. They even announced before President Trump left office last time that they were going to pursue this, and ultimately, like I said, we prevailed. So it’s hard to predict what exactly is necessary to bring about that certainty, because you wanna encourage investment, and investment needs certainty.

Scott Lincicome: Yeah, we always say that businesses don’t build factories on five- or ten-year windows — it’s thirty-year windows, right? And same goes for new investments in agriculture and the rest. I appreciate that. So let’s — I have one audience question that I actually think is pretty interesting: Can you walk us through how you and other members of Congress are playing a role in the review of USMCA, the decision to extend? How are you communicating? Give us a behind-the-scenes look at how Congress is involved in the USMCA negotiations right now.

Rep. Adrian Smith: Sure. Well, I led a letter — 100 colleagues joined me — expressing to the administration our support for USMCA. Now, speaking for myself, I think it’s important to note that we would expect President Trump and his team to pretty fiercely negotiate a path forward, but also realizing the productivity and the effectiveness of USMCA, that I think a lot of things can be pointed to, to support that notion. Now, moving forward, we want language that strengthens USMCA, because a strong agreement implies less uncertainty, or implies more certainty, that can be, I think, productive in terms of generating the investments necessary that ultimately lead to the American consumer winning.

Scott Lincicome: And just to follow up on that audience question — are there regular consultations behind closed doors? Is it more hearings? How does the communication work? I mean, again, it’s a constitutional authority over trade policy, so how does that work?

Rep. Adrian Smith: As a House member, I really appreciate Ambassador Greer being very open and transparent. He takes meetings. He meets with Ways and Means. He takes questions — he takes tough questions. He’s an expert. He is the right person for this job, in terms of his background knowledge and the big picture, and even drilling down into the details. I think he can answer questions, and there’ll be disagreements — I would expect that, speaking for myself — difference in perspective, difference in strategy — but ultimately, reducing barriers overall, I’m confident, is a priority of the administration. And we can disagree a little bit on how we get there, but a robust engagement, I think we should expect, and we are seeing that.

Scott Lincicome: Yeah, but, you know, Greer — he’s a trade lawyer. You can’t trust —

Rep. Adrian Smith: Sorry, as a former trade lawyer, I can make that joke.

Scott Lincicome: Any final thoughts before we close out? I really appreciate your time.

Rep. Adrian Smith: Well, this is about growth and opportunity, and giving the American consumer, hopefully, an advantage — whether it’s in the retail environment, whether it’s domestic US manufacturing and access to supply chains. And we know that there are different dynamics in play here. I think it’s important — you know, COVID was such a disruptor on supply chains. I hope we’ve learned a lot from that, what to do, what not to do, perhaps, but to take that and move forward in a way — I’d like to see more redundancy in supply chains. That keeps our trading partners more accountable, and we’re not as dependent on one country, even a friendly country, as we would be otherwise. So I think the engagements we see — and there is congressional engagement here — my colleagues are, I think, very eager to engage, and have been engaging in a productive fashion.

Scott Lincicome: Great. Well, with that, please join me in thanking Congressman Smith for joining us. It was a fantastic conversation.

Rep. Adrian Smith: Thank you. Great to be here.

Scott Lincicome: So with that, we’ll now transition to our panel discussion. I ask our three panelists to please come up and join me on stage. [Brief pause while panelists take the stage.] So we’re now moving on to the panel stage of the discussion, and let me introduce our panelists.

First, starting from the far side of the stage, Diego Marroquín Bitar is a fellow in the Americas Program at the Center for Strategic and International Studies, where he leads the USMCA Strategic Initiative. He’s a prolific analyst of USMCA, US-Mexico relations, and regional competitiveness.

To Diego’s left is Kate Kalutkiewicz, who is the Senior Managing Director leading McLarty Associates’ trade practice. She has vast international trade experience, with previous roles at the United States Trade Representative’s Office, the White House National Economic Council, and Amazon.

And then closest to me is Flavio Volpe, president of the Automotive Parts Manufacturers Association, which represents over 200 Canadian suppliers of the global automotive industry. He’s among the most vocal and influential private sector champions of North American trade for over a decade, and always gives a great quote, as I was telling him before we began.

So with that, thank you, panelists, for joining us. I think let’s jump right in. We just heard Representative Smith speak about USMCA — he’s the chairman of the trade subcommittee, has all this jurisdiction over trade and trade agreements. I’m curious to hear your initial thoughts on what Chairman Smith just said to us. Why don’t we just start with Diego, and we can move down the line?

Diego Marroquín Bitar: Happy to. First of all, thank you for having me here. This room is particularly special to me — this is where I met one of my favorite authors, Mario Vargas Llosa, a couple years ago.

But reacting to Congressman Smith’s comments, I think I completely agree that the key message was: reinforce, don’t reopen. This agreement has delivered a lot for the three countries — not just Mexico or Canada — in a very complex geopolitical environment. We’ve had Russia’s invasion of Ukraine, we had the pandemic, and many other geopolitical complications, and despite that, the agreement has delivered a 37% increase in intra-trade, an 18% increase in jobs supported by trade, a 16% increase in investment into the region, a much more effective dispute resolution mechanism, and, obviously in the case of Mexico, strengthened labor rights with the new rapid response mechanisms. So, good results.

I think the main problem with USMCA — and it was also a problem with NAFTA — is that there’s not enough political will. Congressman Smith mentioned the corn dispute that Mexico lost, and then they changed their policies, went back to compliance. There was also a dispute on the energy sector where the Canadians and the US were complaining that Mexico was not fulfilling its commitments with the agreement. Again, his words were “slow-walked,” and I agree. That dispute never reached an official panel.

But there’s also a big problem on the US side — there was an auto dispute that the United States lost. Canada and Mexico were on the other side of the conversation, and it’s been 1,289 days since that dispute, as of today. I don’t think there’s any intention for the US to change their interpretation of auto rules of origin. There’s this phrase, “It takes two to tango” — in this case, it takes three. If you really want to leverage the agreement, you need to comply. You need to respect the spirit of the agreement.

And right now we’re at a very tough situation where even if there’s a majority of trade within North America that is still tariff-free, the universe of tariff-free goods is getting smaller and smaller as days go by, as more Section 232 investigations come to fruition. So there’s a real cost. And then the last message I would like to say here is that, although I think we know that we’re not gonna extend the agreement in the next couple of days, we have to be very mindful that the real cost of not extending USMCA is uncertainty, and it was mentioned earlier — uncertainty is a tax on investment. We won’t see USMCA collapsing from one day to the next, but we’re gonna see its absence. If investors don’t know what the rules of the game are gonna be in the next few weeks, in the next few years, investment’s just gonna go somewhere else. We’re gonna feel that in shelves at grocery stores. This is a very costly mistake that we’re making. Even if we’re not getting rid of the agreement, we should really be working to extend it, because it sends a very different signal to the markets.

Scott Lincicome: Kate?

Kate Kalutkiewicz: Just wanted to pick up on there — you asked me to comment on the congressman. I think perhaps what I’m most struck by was his reluctance to say Congress should have a stronger role here, and that’s concerning to me. I mean, look, I was a trade negotiator — it’s not unique for USTR to try to do things without Congress. This is consistent across administrations, across political parties. We like to do things and not ask for permission.

But what’s happening, and I think it started perhaps in the first Trump administration, has gone on and on — the absence of Trade Promotion Authority and the absence of a vision for what trade policy should be — is first an abdication by the Congress, which, don’t have to tell you, has the constitutional authority to set tariff rates. But it means that we sort of flounder around whatever the political moment of the day is, whatever the sector of the day is, and I think it’s a real moment.

I mean, as a trade negotiator back in the day, when the bipartisan consensus on trade — the May 10th Agreement, we called it — really set forward a bipartisan viewpoint on trade policy. It wasn’t just tariffs, wasn’t just non-tariff barriers, it was about labor and environment, and we all agreed, as trade negotiators, that we would seek certain outcomes and be accountable to the Congress. That’s gone. And I think it is precisely the moment for Congress to step back in, because so many new issues have come to the table. Digital policy didn’t really exist when we struck the May 10th Agreement. There is a whole set of new technology issues — AI, cybersecurity — I mean, even some of the agriculture and pharmaceutical biotech issues deserve to have a discussion among the two, maybe more, parties in Congress at present. And that helps the administration set a policy.

Absent that, I think we get this uncertainty, and frankly, the fact is that trade is not really trade per se anymore. It’s not a clean trade negotiation, particularly under this administration, which uses trade as leverage for so much more. And so it’s just become muddied, I think, for us, for our trading partners, and ultimately for the companies that depend on the certainty. So I would’ve liked to see a bit more interest.

Scott Lincicome: Yeah, I kept pushing on that, and they’re very good at diverting — that’s his job, right? Flavio?

Flavio Volpe: Oof. I mean — you said I’m the guy here for the quotes. That’s exactly music to trading partners’ ears. We spent a year, and I listened to the congressman say that this administration is very active and tough on trade, but there’s no theme. And, as my Canadian ears think about Build Back Better and the IRA, saying, “Here’s support for American-assembled vehicles,” both from a consumer level and from a production subsidy level, only to American-built vehicles — that was industrial policy, operating as trade policy, with a clear objective. That was not friendly to Canada, and we spent a lot of time working with the administration to say, “Well, hey, hold on — some of those investments that are excluded are General Motors, and Ford, and BorgWarner, and Lear in your — in Canada, in Mexico — that you’re excluding.”

From Canadian ears, there’s been a lot of noise on trade. The noise started on day one with, “Hey, Canada and Mexico bad, China bad,” which I’m not sure, from a data-driven perspective, is true. And yes, he talks about exemptions, but where you’re using national security tariffs is on American-led investments in Canada. Doesn’t make sense. And in Mexico. So where the hurt is, is in automobiles, steel, and then aluminum, which is crazy to me — it’s always been nuts. And by the way, there’s an Alcoa smelter in Quebec that is getting tariffed and harming American manufacturers, too. Doesn’t make a lot of sense.

Let me say why Quebec is in the aluminum business. In World War II, American defense interests were looking for the best place to get the cheapest energy and access to all of the implements for manufacturing, and set up the aluminum industry in Quebec. And by the way, there isn’t a pull market in Canada for all that capacity. So sure, we love to sell it — who’s “we”? I don’t even know who “we” is. I see Matthew from the Canadian Chamber — we don’t know who “we” is, because we didn’t have a border, and so now we are charging ourselves more for the stuff that we built and need together.

So I don’t know about the trade coherence, but I’ll say the one positive thing is everybody in this space — from USTR to the Secretary of the Economy in Mexico and the Canadian counterparts — are now talking about talking, in a way that sounds like partners that want to stay in a relationship rather than the first salvos in a divorce. And that’s new.

Scott Lincicome: This is the good kind of marriage counseling.

Flavio Volpe: I mean, it is what it is — we’re stuck with each other. We can’t — you know the Looney Tunes bit where you can cut the border — we’re in a marriage. It’s over. The longer this takes, the costlier it will be.

Scott Lincicome: Yeah. So we hinted and talked a little bit about 232 tariffs — I spoke with Chairman Smith about the 232 tariffs. I wanna get all three of your views on those. They are supposedly here to stay, but they’re clearly a burden on US manufacturing. There are all these ridiculous examples, like that Alcoa plant — US steel and aluminum and copper prices are way above global prices. It doesn’t make a ton of sense. Canada and Mexico have said it’s a priority for those governments to get these tariffs removed as well. So it seems again like it’s in everybody’s interest to do something here. Do you see some sort of deal on the 232s — not just for metals, but for autos and other things as well — or are we just stuck? Why don’t we start with you, Flavio, and then we’ll go back down to Diego.

Flavio Volpe: There’s an exemption on USMCA-compliant auto parts to the 232s, which — I don’t want to say we negotiated, I think we all collectively advocated for. Canada and Mexico didn’t trade anything for it. The US didn’t make an adjustment in our tariff policy. It was like, the math doesn’t work, we all understand it, we’re going to stop the auto industry in a week — let’s not tariff auto parts. I think that principle is a good principle for resolving the outstanding 232s on autos and on steel and aluminum.

Look, in the first NAFTA renegotiations with Trump 1.0, the idea was, let’s raise the rules of origin in automotive, let’s squeeze out everybody else, and then go back to the WTO to get a higher MFN tariff. And I think what everybody learned, especially the president and his team, is that you’re not going to the WTO to get a 12-and-a-half percent MFN, but you can do a 232.

The way I see it, we’re gonna be stuck with 232s, but we’ll have real exemptions for USMCA that may get us down to zero, like we did on auto parts — will get us to a place that is a reasonable number. I’ll take my Canada hat off, for American interests in Canada — I’ll give you an example here real quick. Canadians buy more cars made in the US than the next seven trading partners combined. Canadian auto assembly buys $29 billion worth of American auto parts a year — that’s more than the next four combined. That’s an American market. Why put a toll on yourselves in the middle of it? Stop.

Scott Lincicome: Kate?

Kate Kalutkiewicz: Yeah, it’s hard to group the 232s all together because they’re so diverse. Let’s talk about steel and aluminum, because they’ve been around since the beginning. And I think the Trump administration has adopted a different approach when it comes to steel and aluminum. I mean, at the beginning, the notion was, we had taken every step we could take that was allowable by the WTO in the lead-up to the first 232 investigation — we had applied anti-dumping duties, countervailing duties, we’d pushed everything out as far as we could, we’d reduced our imports from China to almost nothing. The decision to enforce, or to put in place, those initial 232 duties was, “Well, we’re just gonna push it back everywhere — it’s coming in through our trading partners, it’s coming in through the South, it’s coming in through everywhere else, we’ll treat everyone the same and just push it out.” We, of course, struck a bunch of bilateral deals, we had a bunch of exceptions — the whole thing didn’t work.

And I think when they came in, two things changed. One was we’re getting away from the deals and the exceptions that didn’t work, but also we would like to see our trading partners also join the fight, because if we really fundamentally want to change Chinese overcapacity and behavior in this space and save our steel and aluminum sector, it’s going to have to be a global effort. And that is being reflected, I think, in the discussions with Canada and Mexico, and this is a positive development. I think it’s also aided by the fact that we need Canadian aluminum and we need Mexican steel — so let’s be clear about that.

Scott Lincicome: So what you’re kind of saying is maybe there’s a common external tariff around the whole North American —

Kate Kalutkiewicz: This appears to be what is being discussed.

Scott Lincicome: Okay.

Kate Kalutkiewicz: And unironically to me, who served in Europe for a long time, we now have adopted this phrase, “Fortress North America” — which used to be a pejorative when we talked about Europe. But it is this notion: if we all adopt similar duties — we all adopt the same duties on steel, aluminum, and derivative goods — then we can have a preferential market within North America. Now, whether or not that functions, whether our trading partners are willing to do that with the trading partners with which they’ve struck trade deals, is an open question. But it does reflect, I think, a primacy of North America and its importance to the US economy. And so that is a positive, which for me is a step in the right direction.

Scott Lincicome: Diego?

Diego Marroquín Bitar: Well, I think, if you wanna build this fortress, you wanna close the gap with China on semiconductors, solar panels, all those things — you need Mexican labor, you need Canadian resources. That’s the economic reality. If you wanna keep your groceries affordable, you need Canadian potatoes, you need Mexican avocados. But we have this agreement, and on top of it, we have the Section 232s.

So, a fun and sad story at the same time, talking about 232s: Mexico put a tariff on Chinese aluminum last year as part of this process, but also responding to domestic concerns. But also, Mexico has to pay the Section 232 on aluminum. So if you buy a can of Mexican beer to celebrate the World Cup, you have to pay twice — the China tariff and the US tariff. So, again, it’s very difficult — if you negotiated this deal in order to facilitate trade, create more jobs, then why do you have something on top of it that is doing quite the opposite? Those are conflicting messages. Do you wanna build things together, do you wanna do it more efficiently? Or do you wanna just reshore everything within the country? That’s something I don’t think the White House has completely resolved as of today, and I think that’s the main obstacle. Mexico has been engaging with the US officially on USMCA extension talks, but it’s gonna be very difficult for Mexico’s negotiating team to put things on the table and to propose things if we don’t get certainty as to what’s gonna happen with those 232s. Maybe they’re not gonna get completely eliminated, but at least Mexico and Canada need to get better treatment relative to other countries in the world. And so far, I haven’t heard anything about that.

Scott Lincicome: Yeah, let’s stick with the Fortress North America stuff, ’cause I think this actually gets to something I was gonna ask you anyway, Diego. Obviously, China is a big motivator for a lot of this stuff — it’s a big motivator for USMCA talks, whether it’s on rules of origin or the tariffs. And I can see the kind of theoretical — it makes some sense, right, that we’ll all apply the same external tariff. But we all know that the North American supply chain really competes against other supply chains — European supply chain, Asian supply chain, the rest. Doesn’t the Fortress North America concept inevitably create a competitiveness problem? You’re suddenly — instead of just the United States paying double for steel and aluminum, we’re gonna make Canada and Mexico pay maybe not double, but a third or whatever it is, more. That will undermine the competitiveness of the manufacturing supply chain, agriculture as well. So at what point does going after China, trying to create these fortress-type tariffs and other barriers, either undermine itself — you just have an uncompetitive North America — or inevitably lead to even more tariffs, right? Now we’re gonna need tariffs on finished vehicles, or tariffs on canned foods — where do you draw the line? How do we deal with that? I’ll start with you, Diego, but anybody else wanna chime in as well.

Diego Marroquín Bitar: Well, it can’t happen overnight. It just can’t. If you close the door to China, you won’t be able to assemble cars. Mexico, for example, just has a very big dependence on Chinese electronics — the same way Canada and the US do with critical minerals. I think Mexico is — geography is destiny, at least in the case of Mexico. We have our biggest market on the other side of the border, and we have a really good partner on the other side. And I think the Mexican government is willing to make that trade-off, as long as there’s some graduality implemented, and as long as, again, there’s certainty as to what’s gonna be the level of access that Mexico gets to the US.

And if we look at it just from the Mexican perspective, Mexico and China are natural competitors, and they have been for a very long time. Mexico was the last country to accept China when China entered the WTO, and I think they’ve been sending those messages throughout the negotiating rounds. But there has to be — it can’t be just sticks, there needs to be some carrots, and I think the Mexicans have also been pushing for this Fortress North America narrative, but there needs to be more engagement with the US. If Mexico’s putting this on the table, what are they getting in return?

Kate Kalutkiewicz: Well, in this case, I think it is important to separate some of the rhetoric and the reality. What are they getting in return? Pretty unfettered access to the United States. Mexico and Canada, from the beginning, have had the best access to the United States thanks to the exceptions under USMCA, and I think that will continue, and I think it underscores some of the optimism, at least that I feel, in the future of this agreement. It is very clear that we are going to stick together, absent some of the president’s hyperbole.

To answer your question, the problem with Fortress North America is actually the other trade agreements that we’re striking. Because it’s one thing to say, “Well, I want to increase value content, I want to make sure that products that really do benefit from the duty-free exception are really products of North America.” That’s something the president says, and frankly, I think most people agree with that notion — if you’re gonna get duty-free treatment, your product should mostly be Mexican, American, and Canadian. That’s changed over time, and I think it’s changed increasingly since the rest of the world got higher tariff rates and Mexico stayed where it was. The problem with increasing costs in electronics, which I think is another key sector after autos — to look at rules of origin content — is that you drive the cost up. That means we can’t compete as much globally, and if, for example, we’ve already given a 15% rate to competitors like Korea, Japan, and Europe, it’s gonna make North America increasingly less competitive. The auto sector is example number one. So I’d be interested in your views on that. But I think the administration is engaging robustly — since that was a theme from the earlier conversation as well — with the stakeholders in the auto sector. I know they’ve done quite a bit of engagement around this competitiveness question. Exceptions don’t seem the answer, but transitions do. So I don’t know if it’s plausible or not, but it is gonna be a big problem they have to confront.

Scott Lincicome: Yeah, you stole my question for Flavio, actually, about rules of origin, so let’s fold that in, right? Automotive rules of origin under USMCA are pretty tight — they require a lot of North American content compared to previous versions in other trade agreements. The United States wants to up that even more, as part of this Fortress North America idea. But there’s also, let’s face it, some straight-up American protectionism in there, pushing US content maybe to 50%, so they say. So along with the cost issue that raises, there’s also a bureaucracy issue — there was a great Federal Reserve study last year that said that just the cost of complying with USMCA automotive rules of origin, just the paperwork, was effectively a 2% tariff, give or take, on automotive trade, which is a lot of money. So, Flavio, how do rules of origin get modified as the parties seem to agree, without increasing bureaucracy, complexity, and just costs overall? Is there a way to do that, or are they kind of killing the golden goose with the North American auto market?

Flavio Volpe: How many hours do I have to answer that? Well, let me just say this — the rules of origin work, and they work for American interests. First of all, it’s the tightest trade agreement in the world with regards to automotive rules. It’s a stark contrast to the 20 years of agreements that the US, Canada, and Mexico signed with everybody else, where the first thing we always traded away was, “Oh, you could send cars in tariff-free with less local content requirement.” Every single trade deal between NAFTA in ’94 and the NAFTA renegotiations in 2018 had lower content requirements. What the USMCA has achieved — let’s just take Canadian car production: in 2019, the last year of the NAFTA rules, the average US content in a Canadian-assembled vehicle was 38%. In 2024, that number was 50%. But that didn’t come at the cost of Mexico and Canada, ’cause we went from 62.5% content on 29 parts categories to 75% on 60 categories. So we all won.

But to the point that you can’t currently assemble a vehicle without Chinese content — that’s because of something we did in the West anyway, over the last 30 years, where we said, “Let’s take some of our most commoditized goods and send them over there, and get them back cheaper.” And we inadvertently contributed to an electronics powerhouse. And so as cars modernize and become high-voltage platforms that require cameras and computing power and sensors, right now, in some cases, the exclusive provider is a Chinese provider. You can do Fortress North American automotive, but it gets hairy when you say that applies to everything, because we all have valuable trading partners in Asia and in Europe who are not just trading partners, but allies who protect our interests — allies who the White House said, “Maybe you’re not doing enough to protect the interests, I wanna see NATO spend go from 2% to 5% of GDP.” Well, you’ve now got everybody to commit to that except for Spain. And you can’t then push those allies to say, “Hey, by the way, that extra $3 trillion that you’re spending — you’re gonna get less access,” to right historical wrongs, while we are not clear about what our objective is vis-à-vis China. There’s a rising hegemony — how is any one of us gonna be able to push them back? I don’t think American interests can push back Chinese momentum by itself. I think the West will have to absorb China for about five years or so, if we align ourselves. But you can’t have your signature domestic continental trade agreement leave holes — and the partners can’t do that either.

I spent a lot of time talking about the Canada-China agreement in principle that allowed Chinese cars into the Canadian market, and the way I explain it — how we debate it publicly at home — is: the Trump administration, over the last year and a half, pushed its allies outside the fence, while the bully next door said, “Hey, by the way, we’re gonna hit you on canola, we’re gonna hit you on fisheries, we’re gonna hit you on everything, and we will only lift that if you do this.” And we didn’t have our friends in Washington as the other half of that ledger. The prime minister had to make a deal on canola, and he gave away some of the car market. Now, I’m pissed off — I’m in the car market — but I know that that was a Canadian decision. We would probably make a different decision if we could settle this.

Scott Lincicome: Yeah, it’s a great transition to what’ll be our second-to-last question, then we’ll take some questions from the audience. For those of you online, if you’d like to submit a question to the panel, please go ahead and do so through the online form.

So let’s talk about something that you just said, Flavio, which is — we’ve read a little bit about Canada and Mexico kind of teaming up in terms of negotiating with the United States. We also have this broader dynamic where the United States, on the one hand, says this is all about China, China, but then on the other hand, it’s smacking its own allies in the head with all these tariffs, and quite frankly, pushing certain countries closer to China’s orbit. So I’m wondering: first of all, is the kind of Canada-Mexico team-up something that is more than rhetoric — is there any real bite there? And, Kate, please start us off on that. But I think, more broadly, do we see the United States’ China policy and its tariff and trade policy really acting at cross-purposes, contradicting each other?

Kate Kalutkiewicz: Well, to your first question, I’m skeptical of any strength in a Mexico-Canada alliance. I think certainly Canada’s trying to push for it, and I think Mexico probably is paying lip service, but Mexico is fully prepared to bilaterally negotiate with the United States, in my opinion, and they’re prepared — I mean, they have been engaging very productively and constructively since the beginning, and I think they’re prepared to continue doing that.

To your other question, I’m not sure that the administration is saying this is a China problem to our allies anymore. The approach on China has also fundamentally changed from the first time. The first time, we were so focused on changing China, on fixing the problems that the WTO had failed to fix with respect to their unfair market policies and practices. We’ve jettisoned that — that’s not a policy choice anymore. We are very focused on improving America’s standing in every one of our relationships. I think it is very much just focused on that, and I think the president would expect trading partners to do the same — and by that I mean, whatever is in your best economic interest is what you should do.

Now, as a former trade negotiator, I would argue almost certainly what’s in their best interest is continued access to the US market. No matter who is in the White House, we have arguably the best consumer market in the world — a massive amount of people who are speaking the same language, who follow the same regulatory profile largely (California notwithstanding). This is where you wanna sell. And if your choice is between the United States and China, I’m gonna say bet on the United States. Again, the rhetoric is unpleasant and feels sometimes like a bully, but at the end of the day, I think this is the market that people would like to maintain access to. So I would say that’s what the driving focus should be — not to please Donald Trump, not to push back against China, but to make a domestic decision that is in their best interest. And again, I think it will lead back to the United States.

Scott Lincicome: Diego, thoughts?

Diego Marroquín Bitar: Well, I disagree a little bit. I think why Mexico started talking to the US first — number one, it was Mexico’s dependence on the US market, although Canada also has a significant dependence on the US for their exports, but Mexico’s just bigger — more jobs depend on that. The other problem is the number of issues that Mexico and the US have to deal with bilaterally, because there are many things in North America that are exclusively bilateral. Security cooperation for Mexico and the US is very different from what the US is doing with Canada. Their border issues are very different. Water management — perhaps not a problem for Canada, but a very important problem for Mexico and the US, how they manage their joint water resources.

I think the issue with the 232s — without trying to go deep into those again — is that Mexico is willing to engage on just the broader set of conversations. I think the takeaway here is that this is not just renegotiations — it’s the largest reframing of North American relations in a generation. And for Mexico, there are just many issues at stake — everything is in the same bucket, not just trade. Again, energy, immigration, security. The Mexican president knew that she had to engage earlier if she wanted to get a better result. And for Canada, the 232s were a non-starter — why would you want to talk about USMCA extension if you had to pay 232s? And that took them a while.

On the point of Mexico-Canada, I think there are really positive signs. Both countries now have what they call a strategic partnership. They have regular meetings — at least quarterly, and once a month — where they have to report to Prime Minister Carney and President Sheinbaum what they’re doing, what they’re working on. But that initiative needs teeth. If we really wanna trade more with each other and depend less on the US, let’s invest in our port infrastructure, for example — we haven’t seen that yet. But I think there are, again, positive signs. Minister LeBlanc said that they also recognize that there are things that need to be dealt with bilaterally, but also strategic issues like rules of origin need engagement with Mexico. President Sheinbaum said the same thing a couple days ago. And I think, as soon as we see Canada start setting dates with the US to talk about the extension, my hope is that Mexico and Canada start coordinating more. I think the president of Mexico understands really well that the best way to defend the status quo in an asymmetrical negotiation is if the two smaller parties join forces. And I think they will be able to do that on rules of origin, but there’s gonna be issues like dairy trade or digital services where the Canadians are gonna have to put up their own proposals, and then the Mexicans, obviously in security, have an entirely different problem they have to deal with.

Scott Lincicome: It’s always Canadian dairy, always. Flavio, any thoughts there?

Flavio Volpe: Yeah, lots. Let me say, from the Canadian perspective, everything was fine — what outstanding issues were there? And the outstanding issues that were there, there were dispute resolution avenues. A strong bilateral relationship — probably the strongest bilateral relationship in the world. We’re talking a lot about defense, but there is a massive undefended border, because culturally there’s a respectful partnership that goes beyond any individual administration. So if Canada took a while to respond to a national security and economic emergency tariffs packaged in annexation threats — let me just say, from Toronto, most of the time we’re like, “Where did this come from?” And fundamentally, the issues that were raised — whether they’re absurd or not — were different than the issues that were raised with Mexico. This administration, the Department of Justice, did not indict a sitting Canadian premier — not yet. This isn’t a dig at Mexico, it’s fundamentally different — we’re gripped with the annexation threat. I mean, I’m looking at Matthew, we laugh now, but a year ago we’re like, “Is this guy serious? What are we talking about?” But that’s serious. And so those are different conversations — there’s always gonna be a different bilateral relationship.

And Canada and Mexico have NAFTA, USMCA, and the TPP together — we’re in trade agreements together. If there was a reason, a commercial reason, a profitable engagement prospect, we would be more aligned than we are today, we’d be more coordinated than we are today. All you’re seeing now is the White House said, “You guys are bad guys, you’re out.” And so a lot is made of Prime Minister Carney’s more global outreach — well, he didn’t have to do that. He probably wouldn’t have been the prime minister if those threats didn’t come. It would’ve been the other guy. He changed an election, though — it was a 25-point lead for the Conservative Party. The only other time a 25-point lead was blown was to Tom Brady in a Super Bowl. And so Canadian politics, Canadian economic dynamics, Canadian defense dynamics have been absurdly variant over the last year because of a decision that started here in the White House to say, “You guys are doing bad.”

Scott Lincicome: Do you think that’s a fundamental shift? I mean, it goes beyond booing the Star-Spangled Banner at hockey games — do you think it’s a fundamental long-term shift for Canada and Canadians, or is it a Trump thing that can shift back after?

Flavio Volpe: Look, we all understand politics — there’ll be a fundamental shift in how Canadians trust Americans, but there is no — you cannot shift geography. And we’re so incredibly integrated, you end up having political discussions with your customers and your suppliers, and everybody does one of these. Now we have to — there are very serious things that have to be settled, and we’ll go back to not booing each other’s national anthem. But it’s gonna be very difficult from an American cultural perspective to understand what an annexation threat means. I said it for a long time last year — I said, “You don’t start by insulting” — by the way, we have a great relationship — “I’m gonna wake up this morning and start insulting you, and then telling you I don’t need you, and then I’m gonna kick you out.” And if you have a really long-term relationship with that partner, that first reaction from that partner’s gonna be, “What happened?” Then the second reaction’s gonna be, “Well, it’s my house too, and if we can’t figure it out, you sleep in the basement, I’m gonna sleep upstairs until we can sell it.” And then you realize, in Canada, US, and of course Mexico, you can’t sell a house. So you gotta figure it out, and that’s where you gotta live. And we got family.

Diego Marroquín Bitar: Just wanna say something there real quick. I think the Canadians are now engaging with the US — talks aren’t frozen because they compartmentalize the sovereignty threats with the need to extend the agreement. In Mexico, that’s also the case, but I think it’s a lot more fragile, the governing situation. There’s real pressure from the US administration for Mexico to deliver results on security cooperation, and it’s not just intelligence sharing as it has been for the past 30 years — it’s a lot more. They want to indict a sitting governor. The president of Mexico, I don’t think she’s willing to do that. Then what happens if she doesn’t? We’ve seen examples of unilateral US action in the hemisphere, and I don’t think Mexico is at risk of something similar happening there — and then what would happen to trade negotiations if something like that were to happen?

For Mexico specifically, the price of admission to the trade table is advancement in security cooperation, and the goalposts are moving continually. And what worries me, at least from the Mexican side, is I think we’re reaching a point — the point of no return — where I think the Mexicans are simply just not willing to engage and deliver what the US wants from them in terms of cooperation, and we should really look out for that this year. Let’s see what happens.

Scott Lincicome: So, we have time for a couple questions from the audience. If you just raise your hands, the mic will come around. We can start there in the front.

Audience member (Merilee, International Trade Today): I had a question about Canada’s leverage, because we talked about how the US position with China has changed — I don’t think it’s so much fatalism, I think it’s that China stepped on our foot in a way that we realized this hurts too much, and we can’t keep punishing them in this way. So, Canada has energy, electricity supplies — what do you think it would take for Canada to really punch the US in the nose in the same way that China did when it cut off critical minerals? And then I also wanted to ask all three: there’s a lot of talk about rules of origin in other categories besides autos — what areas do you think could be most damaging commercially if they tighten rules of origin in those other areas?

Flavio Volpe: Let me just say, on Canada’s leverage real quick — there was a debate maybe we had initially last year: “Well, let’s cut them off.” That debate was quickly quelled internally, to say, “Well, what other path to market is there, geostrategically? How are we gonna live in the same continent 10, 20, 30, 40 years out?” So you hear the prime minister evolving that to: we can more deeply integrate with the US as we diversify, but then figure out, on those big pulls like critical minerals, we absolutely should do that together, and we should figure out how we’re gonna pay for the processing, so we don’t just pull it out of the ground and send it to China to process.

And then on other rules of origin, just real quick, I’ll say one thing that we leave out there in automotive and advanced manufacturing: the tooling industry has moved to China, and the tooling steel has moved to China. So we worry about whether they’re gonna cut us off on magnets, or cybersecurity risk — if they decide tomorrow to put export controls on tools, we would have a really, really big problem. But those are things we can do here, and we have done here, and we should include that in the new USMCA — rules of origin that will help foster that back in Michigan and Ontario and Coahuila.

Scott Lincicome: Anybody else?

Kate Kalutkiewicz: No — it’s hard to predict. I mean, I think it could be commercially damaging if anything is changed too quickly. As we’ve seen, it’s really important to have a transition, because in many cases a dramatic change to rules of origin, which requires significantly higher content restrictions, for industries perhaps that have left North America, would be impossible, and it would be destructive to those industries. So again, I’d go back to: what is the objective? The objective is to ensure that we have consistency across products that are considered products of North America. But increasingly I do see a bit more pragmatism, realism, that these things can’t be rebuilt or dramatically changed overnight, and that makes me feel a bit more optimistic that there are folks in the administration that are trying to drive this toward an appropriate ending that does not kill the North American economy.

Flavio Volpe: Well, they didn’t do anything on the 232 aerospace, even though the deadline passed. We’re waiting on a lot of 232s.

Kate Kalutkiewicz: Yep.

Scott Lincicome: So any other questions in the audience? Okay, I have one online that I think will be a great way to wrap up, ’cause it actually dovetails with something I was gonna ask y’all anyway. I was at a dinner last night, as DC folks do, and someone who’s — we were talking about USMCA, and somebody who was pretty plugged in said something that really shocked me. We were talking about the chances that Donald Trump actually tries to withdraw from the USMCA, because as a lot of folks in this room know, it’s really legally questionable whether Trump, or any president, can do that without Congress. Doing that, as I brought up in the stats in my opening with Chairman Smith, would cause a massive earthquake in supply chains and financial markets. But this person put those chances, after the midterms, at a stunning 30%. He said, “Not, you know, likely, but 30.” For me, I had it maybe at a half a percentage point — given, maybe, 1%. So I wanna ask you, kind of controversially — if you had to put a number on it, and I am putting you on the spot — where would you put the chances that USMCA, that there is that kind of earthquake, in the next, let’s say, two years?

Diego Marroquín Bitar: Okay. Yeah, there’s gonna be a lot of drama this summer — there’s the World Cup, but there’s also the review, and we’re gonna get threats — at least one threat to withdraw, even before July 1st, or at least a couple right after. I still see those as a negotiation tactic — you wanna bring both countries to the table, you wanna extract as much leverage as you can. If I had to put a number, I would put it at maybe half of that — 10, 15%. Maybe if a certain person has a really bad day, he can tweet something, and then maybe that could put us in a very different situation. But this election — last election was about the border, this election is about affordability. If you wanna keep things affordable at the checkout, we need to keep USMCA as it is.

Scott Lincicome: Yeah, I was stunned when I asked Chairman Smith to wrap up — his first comments were on the American consumer, which you never hear from politicians. But still, 10, 15 percent’s pretty high. What do you —

Flavio Volpe: Well, I have learned never to make predictions about what the president might do — because I think what’s important is, you have this card to play one time. I mean, he likes to wave it around — you don’t wanna play it. It is just as powerful to keep it in your hand, and I don’t think you play it until things are so far gone that you feel the compulsory need to do it. Every trade agreement, every treaty the United States signs has an out for the United States. So I think we put too much attention on this withdrawal threat, because, let’s be honest, we can withdraw from anything, we can stop complying with anything — that is our sovereign right, we always make sure that’s in a treaty. I have heard this rumor, and I — we should stop talking about it, ’cause the rumor mill feeds it. We have the leverage that we need — we have two trading partners that are engaging in a really constructive and meaningful way. I think it would be very strange for him to do that. But you’re right, he could have a bad day, but also he could tweet something, and then they could walk it back — we’ve been through this many times, in many cases. So again, the leverage exists whether he plays it or not, so I think it would not be in his interest to play that card.

Kate Kalutkiewicz: The single most negative thing that the president of the United States could do to the American economy is to pull the US out of the USMCA. Now, that does not crater the American economy, but it still is the single most damaging thing you could do. Now, will he threaten it? He’s already threatened it. But I have trust and hope in American interests that don’t need to care about Canada or the US, but have to care about their own standard of life and return on investment, who might at some point remind him that you can’t do that.

Diego Marroquín Bitar: My response to that 30% number was: well, fine, there are no more elections after the midterms, but there’s still a legacy to think about — does he really wanna be the guy who caused grocery prices to spike and factories to close? And it strikes me as — but, you know. But look, I think it’s clear the president does not like USMCA — he doesn’t like it. If he could withdraw from it, he would. He has said that, as recently as last week, again, very definitively. But the actions of the administration tell a different story, and that’s the story we should be paying attention to.

Scott Lincicome: Great. Well, on that optimistic note — to not pay attention to the president — I thank you all for joining us today. It was a fascinating discussion. Thanks, everybody, for joining in person and online, and we’ll see you again next time. Thank you.