US tariffs pause for a month, but 2026 USMCA review could drive renegotiations and market uncertainty
Larry Berman, chief investment officer at ETF Capital Management and a market analyst for BNN Bloomberg, examined US President Donald Trump’s negotiating approach in an opinion piece.
He described Trump’s tactics as highly effective, pointing to a major concession from Mexico within hours of the North American trading day.
Mexican President Claudia Sheinbaum announced that Mexico would immediately deploy 10,000 National Guard troops to its northern border to curb drug trafficking into the United States.
In response, the US pledged to help prevent high-powered weapons from being smuggled into Mexico. Security and business teams from both countries began working on these initiatives immediately.
As part of the agreement, the US paused tariffs on Mexican imports for one month.
However, broader trade concerns remain, particularly with the United States-Mexico-Canada Agreement (USMCA) set for review in 2026.
Berman noted that the looming possibility of tariffs will likely persist until then, as Trump aims to secure a renegotiated USMCA before the 2026 midterm elections.
USMCA Article 34 includes a provision that starts a 10-year countdown to the agreement’s expiration following the 2026 review. To prevent the trade deal from expiring in 2036, all parties must approve an extension for another 16 years at or after the 2026 review.
According to Berman, the Trump administration will likely use this timeline to push for partial renegotiations before granting US approval for renewal.
Washington discussions suggest that proposed changes could include revisions to automotive industry rules of origin, stricter prohibitions on forced labour imports, additional restrictions on Chinese companies operating in North America, and resolutions to ongoing USMCA implementation disputes.
Berman also pointed out that Trump mischaracterized certain trade statistics. Goods imports account for 11 percent of US GDP, with 43 percent of US imports coming from Canada, Mexico, and China.
Higher tariffs on these trade partners would directly affect five percent of US GDP.
With annual US GDP growth typically around two percent, Berman argued that Trump’s proposed tariffs could increase the risk of a US recession.
He noted that the trade deficit Trump cites with Canada is entirely energy-related.
Tariffs on Canadian energy imports would be counterproductive since US infrastructure is designed to process Canada’s heavier crude oil, and the country does not produce enough domestically to meet demand.
Outside of energy, there is no significant trade imbalance, as one-third of trade is in energy, while less than 20 percent involves the auto sector.
Berman suggested that Canada’s upcoming election and potential leadership changes could add further complications. He predicted that tariffs will remain a dominant issue throughout 2025.
While Trump continues to act on his trade policies, Berman believes market uncertainty will persist in the short term but will have minimal long-term impact.
