As the United States-Mexico-Canada Agreement (USMCA) is scheduled to have its six-year review starting July 1, the Trump Administration must decide whether to modify the agreement to extend it for another 16 years, let it expire in 2036, or withdraw entirely. In a new insight, Director of Energy and Environmental Policy Shuting Pomerleau and Trade Policy Analyst Jacob Jensen examine a potential flashpoint in the review: the different approaches taken by the United States and Canada to electric vehicle (EV) policy.

Key points:

• Upcoming negotiations will be important for the auto industry, which must navigate stringent rules-of-origin requirements mandating a certain level of inputs sourced from North America. A primary sticking point will be whether to update the rules for EVs, given the global supply chain’s reliance on China.
• While the United States has overhauled its EV policies by repealing tax incentives and vehicle emissions standards, Canada continues to subsidize EV adoption and recently announced opening its market to Chinese EV imports; this divergence will be a focus of the upcoming USMCA review, particularly given President Trump’s consistent focus on the automotive industry and Chinese exports.
• The negotiations will likely have a significant impact on the automotive industries including EVs, U.S.-Canadian trade relation and economic interdependence.

Read the analysis.