President Donald Trump last week declined to renew the existing U.S.-Mexico-Canada Free Trade Agreement. The consequence of this decision is that while the term of the agreement runs to June 30, 2036, its individual provisions are subject to annual review and renegotiation in each year for the remainder of the 10-year term. Simply put, USMCA is now on life support.
The reality, however, is that the patient is functionally brain dead. USMCA is an artificial creation, reflecting the delusions of crafting, within the U.S. sphere of influence, a free trade area encompassing countries at very different stages of social, political, and economic development.
It’s time for Trump to pull the plug and let USMCA rest in peace. There is a better path forward for all three countries.
As a matter of urgency, Washington and Ottawa should focus on forging a comprehensive bilateral agreement covering trade, finance, labor mobility, and relevant regulatory frameworks. The objective would be to fashion a de facto economic union of the two countries within the next 10 years.
The United States and Canada are both advanced economies with compatible social and demographic profiles, so economic integration on a scale sufficient to create a common market is a realistic objective.
Per the International Monetary Fund, the GDP per capita of the U.S. and Canada is about $94,000 and $60,000, respectively. So, on a per capita basis, the Canadian economy is about two-thirds the size of the U.S. economy. The total population of Canada is 41.5 million, or 12% of the U.S. population of 342.6 million. Geographically, the two countries are comparable in size, with Canada and the U.S. each at about 3.8 million square miles. Cross-border connectivity is seamless, as the U.S. and Canada share a common border that stretches from the Atlantic to the Pacific oceans.
From a national security perspective, geographic propinquity reinforces secure supply lines, particularly with respect to energy and mineral resources, for an expanded defense manufacturing base. For example, Canada (which has the fourth-largest oil reserves after Venezuela, Saudi Arabia, and Iran) accounted for about 75% of total U.S. heavy oil imports of 1.5 billion barrels in 2024. Moreover, Canada and the U.S. are both founding members of NATO, so effective military integration is already a deep-rooted reality.
Washington and Mexico City, in sharp contrast, need a reality check and should press the reset button.
Both countries should acknowledge that they are not ready for a special relationship, given the long-standing unresolved problems with the flow of (a) illegal immigrants and illicit drugs from Mexico to the U.S., and (b) contraband guns from the U.S. to Mexico. Attempting to turbocharge cross-border trade would only compound the severity of the triple threats and almost certainly trigger a national security crisis.
Furthermore, both countries should recognize that even in the absence of the three-headed hydra, the fundamentals for a special economic relationship do not exist and are unlikely to for a generation.
According to the IMF, Mexico’s GDP per capita is only $16,000, or about 17% of that of the U.S.
With a population of 133 million, about 39% the size of the U.S. population, the potential for a flood of Mexican refugees seeking economic opportunity in the U.S. is obvious. A common border stretching from the Atlantic to Pacific facilitates such migration.
Texas, New Mexico, Arizona, and California were once part of Mexico, so the substantial Mexican heritage population of these border states should not come as a surprise. Likewise, the limited social absorptive capacity of the U.S. with respect to continued immigrant flows from Mexico should come as no surprise.
Mexico’s annual real GDP growth rate was a puny 0.6% in 2025. IMF projections for 2026 and 2027 are slightly better at 1.6% and 2.2%, respectively. Clearly, such economic growth rates will not be enough to significantly close the GDP per capita chasm between the U.S. and Mexico over the next 20 years. In the absence of substantial economic convergence, a special U.S.-Mexico relationship is doomed to failure.
TRUMP WON’T RENEW TRADE DEAL WITH MEXICO AND CANADA. HE WOULD BE FOOLISH NOT TO EXTEND IT
The fundamental challenge for Mexico is to encourage rapid domestic economic growth and development by mobilizing domestic savings, attracting massive foreign investment, and implementing major economic reforms.
The U.S. can help by using its significant power as a shareholder of key multilateral institutions such as the World Bank Group, Inter-American Development Bank Group, and the International Monetary Fund to ensure that these institutions make Mexico the single largest investment priority.
Samir Tata is the founder and president of International Political Risk Analytics, an advisory firm based in Reston, Virginia, and author of the book Reflections on Grand Strategy: The Great Powers in the Twenty-first Century.