Affordability pressures are weighing heavily on the White House heading into next year’s midterm elections. They’re also offering cautious hope in Mexico and Canada that the U.S. won’t abandon its trilateral trade pact as the three countries enter a high-stakes review.
Interviews with nine current and former U.S., Canadian and Mexican officials and trade experts suggest a guarded belief that inflation politics heading into the 2026 midterms could temper President Donald Trump’s more explosive threats on the U.S.-Mexico-Canada Agreement.
USMCA, the successor to the North American Free Trade Agreement that Trump negotiated in his first term, governs about $1.5 trillion in annual North American commerce, setting the rules for everything from cars to corn. A built-in “sunset review” requires the three countries next year to decide whether to extend the pact for another 16 years.
Trump has suggested he might pull out of the agreement, but some trade experts on both sides of the border are betting that’s just bluster and that the president wouldn’t risk quashing a deal that has helped keep prices in check.
Part of the reason Trump’s tariffs on Canada and Mexico earlier this year didn’t inflict deeper damage, trade officials said, is that even as Trump imposed 25 percent tariffs on Canadian and Mexican imports, most goods continued to flow duty-free so long as they were compliant with USMCA’s rules. It’s a feature that insulated consumers and underscored the political risk of blowing up the pact.
“Frankly, I don’t see [the U.S. pulling out of USMCA] as that realistic because it would be a disaster for all three countries,” said Canadian Sen. Peter Boehm, chair of the Senate Committee on Foreign Affairs and International Trade. “As you get close to the midterms, I think there will be some moderation in what the Trump administration is doing.”
The sliver of hope rests less on faith in Washington than on a reading of its constraints, with former trade officials on both sides of the border arguing that Trump is boxed in by voters’ worries over high prices. Already, the president had exempted certain agricultural products — like oranges, tomatoes and beef — from tariffs in an effort to respond to the squeeze Americans are feeling, and those officials argue that maintaining open trade relationships with Mexico and Canada are crucial to keeping prices low.
“[Trump] has no room to truly modify the agreement to his taste,” said Luis de la Calle, former undersecretary of international business negotiations at the Ministry of Economy in Mexico and former minister of trade issues at the Mexican embassy in Washington. “He’ll be coming into ‘26 weaker economically than previously because the affordability debate in the U.S. is very damaging politically to him.”
A White House official, granted anonymity to discuss the administration’s thinking, said the idea that the president would temper his approach to tariffs over affordability concerns is “so misguided.” The official added that the U.S. has been “explicit” about its goals of bringing manufacturing back to the U.S., including with autos, and said the “breathing room” Canada and Mexico have been given “is not permanent.”
“The bottom line is that we’ve got these two goals here. We don’t see them as mutually exclusive,” the official said. “We want fair trade deals and better trade deals, and we’re trying to address this affordability crisis, the root which is not tariffs or trade, it’s fiscal policies from the last administration, energy policies, regulatory policies, that sort of thing.”
Top Trump officials have recently threatened to walk. U.S. Trade Representative Jamieson Greer told POLITICO this month that the whole reason there is a review period built into the USMCA was in case the United States “needed to revise it, review it or exit it.”
Gerónimo Gutiérrez, who served as Mexico’s ambassador in Washington during Trump’s first two years, said that Trump’s vague threats are a feature, not a bug, of the negotiating process. A promise to preserve the pact one day can be flipped the next into a pressure campaign for concessions.
“That's just the way he operates. And I think that that will continue,” Gutiérrez said.
Still, the feeling that USMCA is too stabilizing to fail is rooted in the physical realities of the continental economy, especially the auto industry, where domestic supply chains have knit themselves together in the decades since NAFTA was first signed. And it comes at a time when anxieties about auto prices remain high, with inflation on used cars still outpacing that of new cars, as Americans grappling with high prices hang onto their vehicles longer.
“Upending the USMCA, or making it two bilateral deals, instead of a trilateral, would have major ramifications for the auto sector. It’s so integrated in North America,” said Tori Smith, senior vice president at Forbes Tate Partners, a former tax and trade policy advisor for Senator Marsha Blackburn (R-Tenn.) who previously worked for the American Action Forum, a center-right think tank, and the Heritage Foundation. “If you have a shake-up in the rules, or an increase in uncertainty, that has significant ramifications for the U.S. economy.”
“Anything that affects the price of something like vehicles — the second largest purchase an American family will make — that certainly plays a big role in these negotiations,” she added.
The Canadian embassy, asked for comment, referred to a recent POLITICO interview with Canada’s ambassador to the U.S., Kirsten Hillman, in which she said Canada is prepared to push hard for a 16-year extension of the agreement. The Mexican embassy declined to comment.
Still, Trump has shown that he’s sensitive to these price concerns, saying in an interview with POLITICO’s Dasha Burns on Monday that he is open to additional tariff carveouts to address consumer price anxiety, though he said new levies could also be coming.
Even as Mexican and Canadian trade experts acknowledge Trump’s threats are partly performative, they recognize they must be treated as negotiating risks. The review will force the countries to confront a stack of long-running disputes over autos, agriculture, dairy, digital taxes, metals — and even China.
“There are going to be very significant changes,” said Everett Eissenstat, deputy director of the White House’s National Economic Council during Trump’s first term, arguing that the affordability angle “is not necessarily going to put a chill on that” given the long list of issues the three countries need to hash out.
Some believe Trump is hemmed in by Congress, which would need to approve any changes to USMCA — even as the president continues to demonstrate a predilection for pushing the boundaries of the separation of powers, particularly when it comes to tariffs. That could be clarified — or complicated — in the coming weeks, as the Supreme Court weighs a case over Trump’s use of emergency tariff powers, a ruling that could reshape how much unilateral authority he actually has.
The uncertainty, meanwhile, is nudging Canada and Mexico closer to each other, with officials on both sides of the border saying they are exploring deeper bilateral ties, not as a replacement for the trilateral pact but as insurance if Washington’s posture turns more erratic. Both Mexico and Canada see far more leverage in negotiating together rather than in two separate bilateral tracks, whereas Trump and U.S. officials continue to reiterate a preference for one-on-one discussions.
“Both countries want to maintain the trilateral relationship in a reasonable facsimile thereof,” said Ken Frankel, president of the Canadian Council for the Americas. “But at the same time, under the name of diversification and these strong ties that have developed between Mexico and Canada, the idea is, how can both countries make a lot more out of this connection?”
The two countries spent much of the spring reacting to sudden tariff moves, including Trump’s 25 percent levies on Canadian and Mexican goods, which he said were targeted at incentivizing the countries to step up border security efforts targeting the flow of fentanyl. Trump also threatened a 10 percent tariff on Canada over a political dust-up related to a tariff-related ad run by the province of Ontario — but never followed through.
And this week, Trump threatened a new 5 percent tariff on Mexico, accusing the country of violating a decades-old treaty that grants U.S. farmers access to water from the Rio Grande, bringing yet another issue into the fold of talks between the nations.
Despite the threats and provocations, those in Mexico closely watching the trade negotiations remain confident that an agreement can be reached.
“When we met with USTR, CBP, State Department, Congress, Senate, and some other advisors to President Trump, the cross-cutting comments from everyone was, ‘We’re happy about the way we’re working with the Mexican government,’” said Pedro Casas Alatriste, head of the American Chamber of Commerce of Mexico, adding that U.S. officials were “liking the way discussions are heading.”
That sense of momentum is reinforced by the positive working relationship between Trump and Mexican President Claudia Sheinbaum, who speak frequently by phone.
The mood is different in Ottawa, where Trump’s “51st state” comments earlier this year landed as a deep slight. It’s fed a view among many Canadian officials that Trump has abandoned the traditional special relationship, treating Canada no differently than other negotiating counterparts.
Trade strategists suggest that the tempestuous relationship has Ottawa looking to expand connections in Asia, especially with China as a hedge against U.S. unpredictability. That shift could itself irritate Washington as it remains fixated on ensuring Asian countries aren’t taking advantage of preferential trade rules with Mexico and Canada.
“I want to make sure that Canada, Mexico aren't used as an export hub for Vietnam or China or Indonesia,” Geer said at a recent American Growth Summit. “There's a lot of common interest in making sure that if we have that agreement, if it endures, that it truly is for the benefit of these countries."
Eric Miller, a longtime Canadian trade strategist, described sentiment in Ottawa as “pessimistic and quite angry,” reflecting frustration with what officials see as erratic U.S. negotiating signals and a widening gap between rhetoric and practical engagement.
“Considering that the narrative in the press in the last few days has been the question of, will Trump withdraw from USMCA, the experience of the bilateral talks has not given people a huge amount of optimism,” Miller said, while downplaying the importance of the affordability concerns. “The midterms may have some effect, but the midterms are a long way away.”
Daniel Desrochers contributed to this report.
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