Why Asia has huge stakes in US-Mexico-Canada trade deal review

As the United States begins its public consultation process for a 2026 review of the US-Mexico-Canada Agreement (USMCA), Asian economies should pay close attention. The USMCA review will most likely yield one of four results: a renewal of the agreement for another 16 years until 2042, an agreement to allow the pact to expire in 2036, a more immediate termination upon six months’ notice by any party, or a partial or complete overhaul of the agreement.

Given the litany of trade complaints levelled against both Canada and Mexico by the Trump administration, coupled with concerns about increased Chinese economic activity in the region, a renegotiation seems to be on the cards.

Asian economies have an interest in this review and the presumptive modifications, from both a commercial and a broader trade policy perspective. In light of the heightened tariff activity emanating from Washington these days, it is tempting for Asian partners to push the USMCA review to the back burner, viewing it more as a North American matter.

In doing so, however, Asian economies risk finding themselves in a defensive position and being forced to respond to troublesome developments that affect them. A better approach is to take advantage of the opening for public comment to help shape the debate and advance their interests.

The economic stakes for Asia are clear: trade and investment flows from Asia to the three North American countries have sharply increased in recent years. In the past five years, Asian exports to the three USMCA partners grew by nearly 35 per cent, reaching US$1.7 trillion in 2024. Meanwhile, Asian foreign direct investment (FDI) flows to the three countries in 2024 exceeded US$33 billion.

In particular, FDI flows from Asia to Mexico have more than tripled between 2019 and 2024. While Japan, South Korea and China are the major investors, other Asian economies, including Malaysia, India, Indonesia, the Philippines and Singapore, are getting in on the act. This increase in investment activity is driven by a desire to take advantage of the USMCA tariff preferences, secure improved access to the growing Mexican market and diversify trading partners.