On Wednesday, The Wall Street Journal reported that President Donald Trump is pushing tariffs on Mexico and Canada as a bargaining chip to renegotiate the U.S.-Mexico-Canada (USMCA) trade agreement, according to "people familiar with the matter."
The USMCA was engineered during Trump's first term to replace the Clinton-era North American Free Trade Agreement. The USMCA is up for review in 2026, but the "people familiar with the matter" told The Journal that Trump is pushing tariffs to renegotiate sooner.
Among Trump's focuses for renegotiation is the automotive industry. The "people familiar with his thinking," say he's pushing tariffs to move car plants from Mexico and Canada back into the U.S. One anonymous auto executive told The Journal that car manufacturers are scrambling to find ways to satisfy Trump over concern of "blowing up the North American auto supply chain."
The Journal also reported that Trump will turn to his nominee for Commerce secretary, Howard Lutnick, and his nominee for U.S. Trade Representative, Jamieson Greer, to renegotiate the USMCA. Roughly $2 trillion in trade falls under USMCA.
"I don't think there's any question that there will be a reboot of USMCA," said Trump-ally Sen. Kevin Cramer, R-N.D., of Canada and Mexico. "Hopefully they'll respond quickly and dramatically enough to avoid the tariffs altogether. That's certainly the goal."
Sen. Bill Hagerty, R-Tenn., warned it would be "woefully naive" to take Trump's imposition of tariffs as a mere threat. "He will do it."
The New York Times reported on Monday that Trump said he intends to impose a 25% tariff on Mexico and Canada starting February 1. He also directed various agencies to review the impacts of a trade agreement and the tariffs by spring.
On Tuesday, Canadian Prime Minister Justin Trudeau said Canada would issue a "robust, and rapid, and measured, and very strong" response if Trump imposed tariffs, warning it could respond with retaliatory tariffs amounting to $150 billion on orange juice and Kentucky bourbon. The Journal reported that Canada could add an export tax on the 4 million barrels of oil a day it sends to the U.S., which could impact the price of gas for U.S. consumers.
"Everything is on the table," Trudeau stated.
Meanwhile, Mexico's President Claudia Sheinbaum preached calm as a response to Trump's threat, stating, "Let's keep a cool head. We should always avoid confrontations."