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- [00:00]
Wall Street Week Announcer
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- [00:27]
Chase Business Representative
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- [00:35]
Public.com Sponsor Representative
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Chase Business Representative
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- [01:04]
IBM Representative
So there's a lot of noise about AI. But time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM.
- [01:45]
David Westin
This is a special edition of Wall Street Week devoted to the usmca. I'm David Westin, bringing you stories of capitalism. The agreement President Trump negotiated among the United States, Mexico and Canada in his first term is up for renegotiation. And as much as President Trump might have it otherwise, we don't need anything that Canada has, we don't need anything that Mexico has, but they need everything that we have. Some $2 trillion of the North American economy depends on trade across borders with the U.S. canada and Mexico. But exactly what's at stake is different depending on the sector. American farmers are hurting badly. They're desperate for any help they can get to expand export markets hurt by other Trump trade policies, particularly with China. The energy industry doesn't need export markets as much as it needs to find power wherever it can for all those data centers coming online. Power that right now flows to the United States, from Canada, and from the United States to Mexico. But we start with the poster child for North American trade, the auto industry. Since the USMCA's predecessor, NAFTA, came into effect over 30 years ago, autos have been at the center of negotiations. The reason is simple. The industry is tightly integrated across northern and southern US borders. Borders like the one between Detroit, Michigan and Windsor, Ontario.
- [03:10]
Interviewer / Narrator
This is the brand new Gordie Howe International Bridge that spans the Detroit river separating the Motor City from Windsor. It was named for the famed hockey player who was born in Canada, but crossed the border to lead the Detroit Red Wings to four Stanley Cups. Canada paid for the bridge, but now President Trump has put its opening on hold, which in itself is unlikely to divide the two cities economies.
- [03:35]
Paul Krugman
Those are not really separate cities. There just happens to be a borderline through them.
- [03:39]
Interviewer / Narrator
Economist Paul Krugman won the Nobel Prize for his work on trade.
- [03:44]
Paul Krugman
Stuff does go back and forth. There's tremendous amount of specialization which is good for everybody, reduces costs, increase efficiency.
- [03:50]
Interviewer / Narrator
One of the companies benefiting from that back and forth trade is Linamar, a manufacturer with headquarters outside of Toronto. Jim Jarrell is its CEO.
- [04:00]
Jim Jarrell
So we're 60 years old and really, I think when you look at Linamar, we're an advanced manufacturing and product design technology company with 37,000 people global, 87 facilities around the world.
- [04:17]
David Westin
When we talk about the auto part of Linamar's business, how much of your production goes across either the Canadian US border or the US Mexican border, or
- [04:27]
Jim Jarrell
for that matter, Canada, Mexico, I would say a ton. There is so much interconnection integration between it. And I think we've demonstrated this before. We have one part that we do for an OEM customer, two OEMs in the US and the original part that we get is a forging that comes into Mexico, which goes into the US to get some further processing, comes into Canada for further processing, back to the US for further processing, over to Canada, where we do the sort of final assembly and then that gets distributed back into the US as well as Mexico and Canadian auto plants. So again, you can see this full integration of this supply chain in the automotive North American area. And one thing we say is you can't unbake the omelet, right?
- [05:24]
Shannon O'Neill
Manufacturing has become a regional game.
- [05:27]
Interviewer / Narrator
Shannon o' Neill is the Director of Studies at the Council on Foreign Relations, author of the book the Globalization Myth, why Regions Matter, and a Bloomberg opinion contributor.
- [05:38]
Shannon O'Neill
The strength, frankly, of the US auto industry is really a North American auto industry. It is that because cars and car parts are produced across Mexico, Canada and the United States, they are strong, they are competitive, and they're affordably priced. And it's that connection, those supply chains across North America, they're important for autos. They're important for all kinds of manufacturing.
- [06:01]
David Westin
Given how the, I'll call it, North American auto industry has evolved, is it even possible to cut off imports and exports of automobiles and auto parts between the United States and Canada and or Mexico?
- [06:13]
Shannon O'Neill
There's a real question. If we didn't have nafta, if we didn't have usmca, would we have a North American car industry at all? If we didn't have the economies of scale of production that have now developed over North America, could we bring back just a US Produced car? Sure we could, but it would be a much more expensive car. It would likely be a less innovative car in terms of the parts that go into it, and it would be really hard to compete against imports from Japan, South Korea, Europe and other places.
- [06:40]
Interviewer / Narrator
The USMCA may have been a win win for auto industry companies like Linamar
- [06:45]
David Westin
and for American consumers, but it hasn't
- [06:48]
Interviewer / Narrator
necessarily addressed President Trump's underlying concerns about the balance of trade between the US and either Canada or Mexico. For 2025, the US trade deficit with Mexico was nearly $200 billion, with Canada about $46 billion. But O' Neill says regardless of the trade deficit, President Trump is underestimating the extent to which the US Needs trade both ways. With both Canada and Mexico, what we
- [07:14]
Shannon O'Neill
see is a big influx of goods coming from Mexico to the United States is now the number one exporter to the United States or US Importer. In part that's replacing Chinese trade. In part that is just the strength of North American supply chains and the back and forth of goods and services that move there. But we also need to remember that Mexico and Canada are the number one export markets for U.S. companies, for U.S. products that go out into the world. So we are very dependent on them as they are on us.
- [07:45]
Interviewer / Narrator
Another concern often expressed by President Trump when it comes to trade, particularly in the auto industry, is the loss of jobs, something Krugman admits is real, but not really the fault of the usmca.
- [07:58]
David Westin
What do you say to people from my home state of Michigan who hear President Trump say, you know, that's such a good idea. We're going to actually have some barriers put up so that we have more of those plants in Michigan, in Ohio, so we have better jobs because we have lost a lot of those jobs.
- [08:14]
Paul Krugman
We have lost a lot of jobs. But it's not mostly because of nafta, Right? I still call it nafta. Sorry, it's a lot easier, given that Trump keeps changing the name. But anyway, do we have fewer manufacturing jobs in the United States. Do we have fewer auto jobs in the United States because of the usmca? I think that's highly doubtful. The idea that somehow turning our back on the world here is going to add jobs is probably wrong.
- [08:44]
Interviewer / Narrator
And then there's China. Not part of USMCA negotiations, but always a specter in the room.
- [08:50]
Shannon O'Neill
China is looming over all of these negotiations. And this real worry about China selling products into the United States, using Mexico or Canada as a backdoor in. Right. Getting the benefits of free trade without actually being party to the negotiations and to the agreements. And so what we've seen is Mexico in particular push back against Chinese imports, which have grown dramatically over the last five years into Mexico. Some of this are cars and car parts and the like, some are other electronics and the like. So we've seen them push back to really support North America. And as we get into the USMCA negotiations, China and this idea of transhipment, of shipping parts in through Mexico to the United States is a big part of, of the conversation. And one can see, and I think all parties are open to creating a real North America fortress vis a vis China, vis a vis other imports from around the world.
- [09:40]
Paul Krugman
We're in a world now where, as we've seen, interdependence can be weaponized. We used to think that that was something we did to other countries, but now we find out that other countries do it to us too. So the idea that you need to maintain capacity in your own country or in reliable allies for strategically important stuff is now very, very real. I am really reluctant to be where I am right now, but I do think that conditional tariffs on Chinese cars are probably going to be necessary. I don't think that the Europeans can allow their auto industry to be totally hollowed out. Now there's some compromise here, probably totally trying to shut Chinese cars out of the market is going to be a bad thing, be very costly to consumers. But on the other hand, I've been shocked not only by my own change of mind, but by some of my colleagues, people who are longtime advocates of globalization and free trade, who are saying, ok, Europe needs to do some really, if you like, it's national security, it's market disruption. To just allow something as big as the European auto industry to just be overrun. Even if consumers would benefit for a while, it's not 20 years ago anymore. We really do need to rethink, which is a long way from saying that we should have tariffs on everything or that the Europeans should have tariffs on everything. But a much more Interventionist position has become really hard to avoid.
- [11:14]
Interviewer / Narrator
But for all the concern about trade deficits and jobs and putting sand in the gears of the North American auto industry, those most closely involved have one concern above all.
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Jim Jarrell
I would say certainty has got to be the prize award that we've got to be chasing here. I just think that is absolutely critical to have that.
- [11:37]
Paul Krugman
The great virtue of this whole world trade system that the United States basically set up after World War II was that it provided wasn't just that the tariffs were low though that's important. But, but even more important things were predictable. I would almost prefer that Trump put on more tariffs on Canada and Mexico, but committed to keep them in place than have rolling negotiations where every year you don't know what next year will be like.
- [12:04]
David Westin
If you were advising President Trump how to win the negotiation with Canada and Mexico, what would you advise him?
- [12:11]
Paul Krugman
USMCA is an easy case because this is not. There is no trade conflict here except in Trump's mind. All of the things we're talking about are not a problem for the usmca. We shouldn't be worried about being dependent on Canadian aluminum. They've got the hydropower, they've got the cheap electricity, they're right next to us. They speak almost the same language. This is not an issue. We are not really worried about the US auto industry being hollowed out by Mexican auto production because Mexican auto production is part of an integrated system which actually probably makes the US more competitive. The usmca or maybe just rename it NAFTA and go back to the original purpose, which is this is a case where it really makes sense to have a true free trade area. In fact, if I could, I would say this is a case where we should go beyond free trade to a European Union style customs union with free movement of goods, cross borders, no checks at all. A common external frontier for goods. We have a real problem with China. The problem with Mexico and Canada is just a figment of the President's imagination.
- [13:27]
David Westin
Next we turn from a vibrant auto sector crossing national boundaries to an agriculture sector struggling to keep its head above water and what American farmers need most from a renegotiated usmca.
- [13:44]
Wall Street Week Announcer
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- [14:17]
IBM Representative
So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off. Deep in the work that moves the business. Let's create smarter business IBM support for
- [14:47]
Public.com Sponsor Representative
the show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public Investing Brokered services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors, LLC. SEC registered advisor complete disclosures available@public.com disclosures.
- [16:03]
David Westin
This is a story about not making things worse. As the U.S. mexico and Canada negotiate over continuation of their three way trade agreement, U.S. farmers look on with apprehension. They've already been hit hard by troubled export markets elsewhere in the world, particularly to China.
- [16:23]
Tom Halvorsen
Our farmers are true patriots because China
- [16:29]
David Westin
and others have targeted China.
- [16:34]
Tom Halvorsen
Others, remember this, have targeted our farmers.
- [16:38]
Interviewer / Narrator
In rural Iowa, Stu Swanson has just planted his 34th and likely most challenging crop.
- [16:46]
Stu Swanson
Unfortunately, the clock is ticking on us. We're at this point where we need to get a plan going forward or the operation may come to an end. And my farming operation, I would do anything I had to keep it alive. I would go find another job. I would downsize or upsize or whatever I need to do. But the heritage of and the sacrifices that my parents and grandparents made. I don't want to be the generation or the person that that fails and lets them down is something I think about daily. It's something I think a lot about in the dark of night that keeps me up. We have to find a way going forward, and we've kind of been operating on hope the last few years. That hope is starting to dwindle.
- [17:33]
Interviewer / Narrator
Swanson is a corn, soy and pig farmer and on the board of the Iowa Corn Growers Association. We met him a year ago on his farm amid a tough period for the agriculture industry.
- [17:45]
David Westin
A lot of farms, I understand, are actually cash negative. Are you cash positive?
- [17:52]
Stu Swanson
I haven't ran a number to tell you today. Certainly we know that over the last three years, we've seen about a 30% decline in commodity prices. I think over that same time, we've seen the nine major crops all be underwater. So we are producing at a loss on the nine major crops.
- [18:14]
Interviewer / Narrator
In the years since, conditions appear only to have gotten worse. Even after a $12 billion aid package from the Trump administration.
- [18:23]
Stu Swanson
It's been a tough winter. In spring, we've lost farmers in our neighborhood and across the state that took their lives because of the struggles they've seen. We've seen farmers that weren't able to get financing for the 2026 crop. And so, unfortunately, when we have low returns, at some point, the financing dries up.
- [18:45]
Interviewer / Narrator
If US Trade policy overall has been rough on farmers, the one bright spot has been the usmca, which has shifted exports from declining Chinese business to growing business with Canada and Mexico. Since 2023, China has slipped from the top export market for US agriculture to to third, with Mexico now top and Canada second.
- [19:07]
Tom Halvorsen
Since NAFTA to today, since it was inception to today, US ag exports to Mexico and Canada have grown about 600%.
- [19:18]
Interviewer / Narrator
Tom Halvorsen is the CEO of CoBank, which operates as a farm credit bank.
- [19:23]
Tom Halvorsen
The most important thing I can say about that is, you know, this has been a massive trade liberalization success in the agricultural sector. I'm not going to speak to autos or other industries and so forth, but from an agricultural perspective, it's been a tremendous success. Does that mean every single agricultural producer in every nook and cranny of the United States has benefited from it? No. That's not the way economics works.
- [19:45]
Chase Business Representative
Right.
- [19:46]
Tom Halvorsen
You have winners, you have losers. But the biggest number of winners, the biggest incremental value creation has come from the liberalization of these markets. To me, moving backward would be to reverse that trend. Increase tariffs, increase market barriers, drive our closest neighbors and colleagues in Canada or Mexico to retaliate against us in a way that would harm our access to those markets. Just remember these are the two largest markets for American agricultural exports in the world. They happen to be our closest neighbors and where we have the greatest, greatest ability to incrementally grow our volume. The more successful and the more prosperous, Canada and Mexico, the more prosperous and successful as the United States in general, but particularly American agricultural producers.
- [20:36]
Interviewer / Narrator
It's why both Halvorson and Swanson value stability over all else. As the USMCA comes up for review, they favor a 16 year renewal instead of potential annual reviews.
- [20:48]
David Westin
From the point of view of an American farmer. Taking a look at this renegotiation of usmca, what's the best they might hope for and what's the worst they might fear coming out of the U.S. i
- [20:57]
Tom Halvorsen
think the best that we can hope for here is we keep all the benefits that we have of the liberalization we've accomplished over the last 30 years and then we add a little bit to it, right. So that over the next 16 years, if we get a, if we, we get a push out for 16 years of a renewal, that would provide a great deal of stability and confidence for our agricultural producers to say, hey, this is a framework of trade that's going to last and be stable and I'm not going to have any unexpected negative consequences for quite some time. Therefore, I can have some confidence in making long term investment decisions. Right. Because one of the things we're having difficulties and challenges with and certain sectors right now because of trade uncertainty is people don't know they're delaying making investment decisions. Right. Because they don't know if that investment decision is going to be wise or not. If tariffs and the changes in their costs and ability to sell their product are going to be meaningfully affected.
- [21:56]
David Westin
That suggests perhaps almost as important as the terms is the duration.
- [22:01]
Tom Halvorsen
Yes.
- [22:02]
David Westin
Because you need that certainty if you're a farmer.
- [22:05]
Tom Halvorsen
I think it's fair to say that if we got the, if we got a continuation with a little bit of, a little bit of small l liberalization somewhere, some benefits in dairy or some other place, but it was only for a year and we were all told, well, we're going to do this year after year after year and definitely into the future, that would not eliminate or mitigate the problem that we have of long term uncertainty. Because we're not building power plants with a 40 or 50 year life here. We are making lots of long term investments and that is oftentimes very significantly impacted by the trade regime. Right now about 20% of our agricultural product in total has to be exported. We have no population growth in the United States right now. So the more agricultural productivity and output we have, it's not hard to recognize that it's got to go someplace, right, and we're not going to consume it here in the United States. So the long term future for US Agriculture can be defined as export exports and more exports in corn.
- [23:05]
David Westin
One of the destinations for those exports, increasingly is Mexico.
- [23:09]
Interviewer / Narrator
It is the largest export market for US corn. According to USDA data, the US exported almost 4 million tons of corn to Mexico in the first two months of the year, an increase of around 11% from the same period last year.
- [23:24]
Stu Swanson
It's like 6.5% of the total product goes to Mexico alone. The two countries combined, when you look at corn and corn products, it's about 1.8 billion bushels of corn, which is the entire production of the state of Minnesota, or again, that carryout that we have. So if we don't have this relationship of the three countries, we're looking at doubling our carryouts and then finding a situation where we just simply won't be able to dig ourselves out of that kind of a. So it's a really, really big deal. It's the gold standard in my mind. It's something that we could replicate across the world.
- [24:02]
Interviewer / Narrator
But despite it being the gold standard for US Farmers, America does run a trade deficit in agriculture with both Mexico and Canada, which could have the potential to be a sticking point for the
- [24:13]
Tom Halvorsen
Trump administration, which we've had for three or four years now. It's the natural aggregation of the market for and decisions of American consumers. You probably do like I do. And most of the people we know want to have, you know, fruits and vegetables we used to not get in the wintertime. Now we want them 365 days a year. That means we have to buy them and import them from other places. And the result of that is even though we're exporting more and more agricultural volume, we're also importing more. That has resulted in our agricultural balance of trade going negative.
- [24:46]
Interviewer / Narrator
President Trump has long talked up his support from and for farmers. And earlier this month he traveled to Wisconsin to meet with him as president.
- [24:55]
David Westin
I fought for the American farmer like no one has ever fought before.
- [24:58]
Tom Halvorsen
Nobody's like, I'm up here today.
- [24:59]
David Westin
I don't need this.
- [25:00]
Tom Halvorsen
I got elected. I don't have.
- [25:02]
David Westin
What the hell do I have to be here for?
- [25:04]
Tom Halvorsen
My personal judgment, what I do and what I encourage customers and people I talk to to do with all politicians, quite frankly, is, you know, listen carefully to what people say, but watch what they do. Watch what the results of the policies are, try and understand what the intended results are, and then always watch extremely carefully and closely for what always happens, which is the unintended consequences. Because it's often the unintended consequences that are the most consequential and come at you from an unexpected perspective. And I think, you know, one of the places to look always for unintended consequences is when you think you have a very strong negotiating position, when you put tariffs on somebody and don't expect them to retaliate. And then they do. The unintended consequence of that is, well, they did. And now that's costing our producers or our industry.
- [25:59]
Interviewer / Narrator
Be it a trade dispute with China putting a halt to soybean orders or the war in Iran driving up fertilizer costs, farmers have felt the brunt of those unintended consequences.
- [26:10]
Stu Swanson
I'm excited that President Trump has initiated lots of trade talks. I would like to see more details and I would like to see the boats loaded and product moving. Unfortunately, it's not moving as fast as I would like. I think all farmers, when we hear about a trade deal, we expect that tomorrow we'll see the price go up and we'll see the products moving in our community carry out going down. But we haven't seen that yet now because I think we're at a crossroads where we might need to look at farm policy a lot different than we have in the past. And this might be the time where we change direction on some of these things, including subsidies and payments. If we can utilize the benefits of the government in terms of trade investment into new domestic uses to help find new markets, I think that's the way we have long term success. This is the end of the line here pretty quick. I think we've seen the start of the loss of farmers permanently. One way or another, I think that we could increase the speed of the change of agriculture.
- [27:14]
Interviewer / Narrator
For corn farmers like Stu Swanson, the change needed may not be in the USMCA at all. They've seen their exports rise to both Canada and Mexico. What they need are trade deals with the rest of the world to restore export markets that they've lost
- [27:32]
David Westin
coming up from cars to farms to new technology. What the energy business needs in North America to generate all that power AI is looking to consume.
- [27:46]
Wall Street Week Announcer
Wall Street Week is brought to you by OTC Markets Group. Thinking about joining the exploding overnight market space, but unsure where to start. Designed to meet the needs of a growing international investor base. OTC Markets Overnight Platform for Exchange listed securities Moon ATS provides access to global securities in US dollars from 8pm to 4am Eastern Sunday through Thursday. Extend your trading day and trade global securities in US Dollars through a FINRA licensed broker dealer in April, over US$4.5 billion traded on moon ATS support for
- [28:19]
Public.com Sponsor Representative
this show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors LLC SEC registered advisor complete
- [29:25]
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- [30:29]
David Westin
This is a story about parallel play. If North American trade in autos goes back and forth among the three countries and trade in agriculture is largely US exports when it comes to energy, one size definitely does not fit all the US Generally imports oil from Canada and exports natural gas to Mexico. The USMCA may aspire to be multilateral, but in practice it looks more like two bilateral arrangements. David Gura brings us the story.
- [30:59]
David Gura
Howard Energy Partners has a natural gas pipeline that runs from South Texas to Monterey in Mexico. It supplies part of the 6.4 billion cubic feet of natural gas Mexico imports from the US Each day.
- [31:14]
Mike Howard
We're the only one that actually crosses the border, on both sides of the border with the same ownership. There are other pipelines that end at the border of Mexico and Texas, but then gets picked up by another company in Mexico and continues on. We're the only one that actually crosses the border, but there's. There's probably on the order of 10 pipelines that cross into Mexico from the
- [31:36]
David Gura
US CEO Mike Howard sees Mexico's reliance on the US firsthand.
- [31:41]
Mike Howard
All business starts with energy. And the energy business is the business that powers every other business. So whether they produce their own energy or not, they need the energy. And so if a US Company is not invited to own infrastructure in Mexico, somebody needs to build it. So if they want to build it, that's fine. I think America has the most affordable, most reliable forms of energy to give to them.
- [32:05]
David Gura
Energy trade standards between the U.S. mexico and Canada were first established by NAFTA, which included zero tariff treatment for oil, natural gas, and reform petroleum products. The flow of energy exports had been integrated across all three countries. But in the intervening years, that's changed.
- [32:22]
Diego Marroquin Vitar
Well, the thing about North America is that most of the times it works as two very big bilateral relationships. The US and Mexico on one side, the US and Canada on the other.
- [32:33]
David Gura
Diego Marroquin Vitar is at csis.
- [32:36]
Diego Marroquin Vitar
We have to keep in mind that we have a North American energy machine that has churned for over 100 years, not just the past 30 years since NAFTA. I think the main difference now is that as years go by, the US market becomes increasingly dependent, increasingly interconnected to the Mexican market and to the Canadian market. You can see it clearly, for example, on oil. 60% of US oil imports come from Canada. The refineries in the US are adapted in order to refine that sour crude oil from Canada. In the case of Mexico, 70% of the natural gas that Mexico imports yearly comes from the U.S. 60% of the electricity generated in Mexico comes from natural gas. So the US Is using Canada and Mexico's export markets, and then those two other countries are using that cheaper energy in order to make competitive products. So again, the longer this goes for, the more Integrated we are and the more disruptive trade and investment obstacles become.
- [33:39]
David Gura
Mexico has long recognized its reliance on the US for energy. And one way it's tried to reduce that dependence is by strengthening its own energy sector. But progress has been limited.
- [33:51]
Diego Marroquin Vitar
Mexico's perspective has changed over the years. We had basically a state monopoly on energy production for over 70 years. That changed in 2014 when the then president administration liberalize the energy market. That quickly went away when President Lopez Ogador got elected in 2018 and he reversed the liberalizing market reforms. So what he basically did was changing the state owned firms from Mexico. CFE for electricity, PEMEX for oil production. And instead of being productive entities, they became public entities. And what, what that did was it created a threshold for electricity production in Mexico that needs to come from PEMEX and cfe.
- [34:36]
David Gura
Those state owned firms are the biggest causes of friction between the US and Mexico when it comes to the cross border energy trade.
- [34:43]
Diego Marroquin Vitar
So the main complaints are number one, PEMEX and cfe. Mexico state owned firms getting priority, getting more lenient treatment compared to US firms investing in Mexico. One of the core commitments of USMCA is you have to treat everyone the same regardless of where the capital is coming from. And these constitutional amendments that the President Sheinbaum implemented, that President Lopez Urrador also was pushing for, they are giving PEMEX and CFE a predominant position in Mexico's energy market. And that's one of the biggest obstacles that we have for the USMCA review.
- [35:22]
David Gura
It may seem like the US has an upper hand in the ongoing trade talks, but that's less clear when the US has something to sell that it needs Mexico to buy. When you look at how your company is growing, how big a role is Mexico going to play?
- [35:36]
Mike Howard
You know, geographically it's a big deal. Economically it's less than 10% of the business we have. But we just completed a new presidential permit to lay another pipeline into Mexico. One of the pipelines we didn't mention is over near Eagle Pass Del Rio. It actually delivers natural gas to the world's largest brewery. So if you drink Modelo beer, our natural gas actually boils the water that makes the beer. I think it's very important for the border of Mexico and also for the, you know, the continuing growth of their economy is to continue to support any kind of electricity demand or energy that they may need to help their economy. So it's very important to our business. It's not an economic driver necessarily in a majority way, but it's very important
- [36:19]
David Gura
to us about 1500 miles north of the U. S. Mexico border. It's a very different story, but it wasn't always that way. Jatain da Silva was CEO of the Canada Energy Regulator from 2020 to 2023. How would you characterize the energy relationship between Canada and the U.S. today?
- [36:40]
Jatain da Silva
I think it's mutually beneficial. I mean, Americans are very fortunate to be be sitting beside a country that has such a vast landmass and so few people that is blessed with pretty much every energy resource there is, not just oil and gas, but uranium as well. And so I think it's very fortunate for the United States that we have this agreement that has encouraged the integration for Canada. Of course the reverse is true. Having such vast quantities of commodities and being a middle power and a trading nation to be sitting besides the world's largest economy is obviously a great advantage. And so we're hopeful that any renewed trade agreement will continue to allow that energy to flow freely across the border.
- [37:19]
David Gura
Do you think that Americans appreciate that, that it is such a beneficial relationship?
- [37:24]
Jatain da Silva
In my experience, most Americans are completely shocked when they find out that Canada is their largest supplier of energy. They think it's Saudi Arabia or a country in the Middle East. And so they're often quite surprised to find out that 60% of their oil exchange exports come from north of the border. You know, in my experience, Americans just don't think about Canada the way Canadians do.
- [37:42]
David Gura
Even though the energy relationship between the U.S. and Canada is a productive one. Energy is the main reason the U.S. trade deficit with Canada reached about $46 billion in 2025.
- [37:54]
Jatain da Silva
NAFTA had an energy chapter or the proportionality clause because the NAFTA was signed and negotiated not the that long after the last global energy crisis. So one of the American priorities in that negotiation was to ensure access to Canada's vast energy resources. And so a provision was put in the NAFTA that required Canada to sell as much energy to the United States on a good day is on a bad day. As a result of that, Canada built its energy infrastructure north, south and not east, west or west east. So if you look at a map of pipelines in North America, the over overwhelming majority from Canada go south into the United States, even if they go south around the Great Lakes and back up into Canada. And so when the USMCA came around, given the fact that that infrastructure already existed, that basically ensured the proportionality. That and the fact that the US had undergone a shale revolution meant that the USMCA does not have an energy chapter, no proportionality clause. And so I think the question for many people going forward, given this state of the global energy situation, is will the US be looking to return to some type of energy clause in a renewed usmca?
- [39:00]
David Gura
Do you think that Canada is utilizing that leverage appropriately in these negotiations, or could it be doing more to kind of wield influence as these talks get underway?
- [39:08]
Jatain da Silva
I think there was a great debate in Canada initially when we went all elbows up in terms of the President's threats towards Canada and the imposition of tariffs. Tariffs, you know, what do we have that the United States needs that we could easily withhold and that would cause grief in the American economy and hopefully get things back on track. I think now, though, Canadians realize that the better approach is demonstrating to the US Administration that we have the best product out there that is helping to make America great again. And you've seen this shift in tone from our Prime Minister as well. He was recently in the United States and he indicated that, you know, a strong Canada is, is what will help to make America great again. And so just this understanding that there is a high degree of commonality, that there's lots of things that are mutually beneficial in this agreement. And I think for Canada, it's looking at that longer term play.
- [39:57]
David Gura
How does Canada balance its eagerness to diversify, find more audiences for exports with the fact that the US Is so critical, so important to it.
- [40:08]
Jatain da Silva
Canada is engaged in a game of 3D. I mean, the reality is that the US is a hugely important market for us. So more than 70% of our exports still go to the United states, more than 90% of our energy exports. We cannot replace that market overnight. And also we know it is never smart to just have one customer. So we need to diversify our economy. And certainly that has taken greater priority in light of the tone and approach of the current administration. It is a very fine balance.
- [40:35]
David Gura
I'm curious, curious what the energy relationship is like between Canada and Mexico. Is there one to speak of?
- [40:42]
Jatain da Silva
There is certainly a relationship. You know, as Mexico was looking to build out its energy sector, it looked to Canadians regulations to do that. They looked to Canada's national energy regulator as well as to some provincial energy regulators to figure out how they wanted to set up their systems. We did also see, you know, in the late 90s, early 2000s actually, we saw the major pipeline companies here in Canada, Enbridge and TC Energy actually made big purchases. They bought pipeline networks all the way through North America. And then with the changing government in Mexico and the approach to nationalizing their energy sector. Some of them pulled out. But you know, there is a lot of trade and services and expertise that happens between Canada and Mexico and the energy sector.
- [41:25]
David Gura
Even today, with energy as a multilateral issue where all the parties involved seem to benefit, many of the industry's players agree on one thing, that the best outcome might be the status quo.
- [41:39]
Mike Howard
We probably want to make sure that energy stays out of the conversation because right now, the free flow of energy that's going on right now is helping the economy grow. If their economy grows, it helps the US and vice versa. So I am interested to make sure that energy energy doesn't become part of the conversation. But other than that, I'm more interested to understand if there's any other economic impacts that will slow the energy use or slow the energy growth of Mexico down.
- [42:05]
David Westin
Next, the best we can hope for and the worst we might fear from the USMCA negotiations, We talk with former trade negotiators from the three countries at the table.
- [42:22]
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- [42:54]
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- [45:04]
David Westin
Negotiations over the USMCA are about the sectors most directly involved, like autos and agriculture and energy. But ultimately they're about three what they hope to achieve from any revisions to the trade agreement and what they need to protect. For these three perspectives, we welcome now Kristin He Hellman. She's former Canadian Ambassador to the United States Geronimo Guterres Fernandez, former Mexican Ambassador, the US And Kellyanne Shaw, former USTR General Counsel now with the Aiken Group here in Washington. I'll start with you, Kirsten, because you were involved in the USMCA negotiation, let me ask the really scary question. What is the chance we end up with no deal?
- [45:44]
Chase Business Representative
Yeah, well, I think the first thing, and there's a lot of complicated process around what's going on on right now, I think the one thing that's important for people to understand is that there is a deal. And Even if on July 1st the parties don't agree to renew, stays in place and we work to find ways to come to an agreement on modifications. But while we're working on that, the agreement stays in place. So I think the chances of the deal staying in place are very high then arrangements around the modifications. I also think we have a very good chance. There's a lot of things in particular that USTR said they're looking for that I think both Canada and Mexico can work with.
- [46:23]
David Westin
Let's ask a different kind of risk because I've also seen some people say there's a possibility that the US Would do a deal with Mexico and leave Canada out. Given some of what the Prime Minister of Canada has been saying, is there any prospect for that?
- [46:37]
Geronimo Guterres Fernandez
I Think we saw it during the first USMC annual negotiation. We saw, you know, a similar environment. And I think the fact that we ended up with a trilateral agreement reflects the fact that it is extremely important for North America as a region. So, you know, negotiate. Trade negotiations are never easy. Even less so nowadays. Even less so when you have sort of a contaminated agenda, you know, very complex geopolitical agenda and security agenda at the same time going on. But in my view, there has never been a time, I think, which makes more sense to continue building up our North American economic region. And if we add security to that, given the geopolitical context, to me, makes all the sense, sense in the world, nevertheless, to be also objective. We have never been, I think, in the past 30 years, as close as losing that opportunity. And that, that's, in a sense, that's a shame.
- [47:47]
David Westin
Kellyanne Hieronymous says there's never been a time when it's more important to have this. Does President Trump agree with that? If you listen to his trade representative, doesn't always sound that way.
- [47:57]
Kellyanne Shaw
Well, look, I think the North American trading relationship is the biggest trading relationship on the planet. It is incredibly important. The real question is, does President Trump value usmca? This particular trade agreement? He's always been skeptical of it. I was in the first Trump administration. I was there when this agreement concluded. When it passed through Congress, he thought it was an improvement on nafta, but insisted on this sunset provision, which we're dealing with right now, the six year review, so that it wouldn't be like NAFTA, where we're stuck with it for 25 years and can't do anything about it. But I think at the end of the day, everybody appreciates how important this economy and this North American trading system is.
- [48:37]
Chase Business Representative
David, could I just add one thing too, that I think is important to recognize? There's a lot of discussion around tariffs, right? Tariffs are a big part of the discussion that we've had since President Trump has come back into office. But the USMCA contains all the rules on intellectual property protection, all the rules on agriculture, all the rules on services trade, all the rules that deal with how we have our customs procedures sort of coordinated between the three countries. So the agreement is the foundation of the integrated nature of our relationship. If it goes away, none of us are bound by those rules anymore. That's why the implications of the agreement going away are enormous.
- [49:15]
Geronimo Guterres Fernandez
I think that when USMCA came into effect, enter into force in 20, it was actually seen as the future model agreement by The United States. I think the fact that it includes a provision that we did not have in the North American Free Trade Agreement, which is the possibility of reviewing, makes all the sense in the world because in NAFTA it was sort of all or nothing. Again, I would emphasize that in the end it makes USMCA is not perfect, but it works. And I think the past six years we have seen that our intra regional
- [49:54]
Public.com Sponsor Representative
trade
- [49:56]
Geronimo Guterres Fernandez
has evolved favorably. I think that if you ask a lot of the industries that are relevant for North America, they will tell you that USMCA is a fundamental tool for them in producing together in North America and exporting to other regions.
- [50:15]
David Westin
Kellyanne, you raise automotive as a really important factor here, always has been among these three countries. But I think you can't right now discuss automotive even more so than six years ago without talking about a fourth country, which is China, and the looming part prospect of Chinese exports of automobiles into Canada as well as ultimately perhaps the United States. Certainly we're seeing it in Europe. So to what extent might the Trump administration see this renegotiation review of USMCA be a way of creating, I think some of their Canadian friends called it Fortress North America.
- [50:53]
Kellyanne Shaw
President Trump was describing it as a zero sum game. He wants the auto industry, I want the auto industry. Only one of us is going to have it. Now it's a negotiation, so we'll see where this lands. But I do think that the administration wants a very aggressive change to the rules of origin, which would actually also have a domestic content requirement, meaning some of that car is going to have to be made in the United States to qualify for usmca. And almost none of that car should be made by any components from China. And that's a way not only to bolster the domestic industry, but also to protect the North American industry from Chinese inputs.
- [51:28]
Geronimo Guterres Fernandez
In the case of Mexico, I think going back to the deficit, I think it's important to note again, you know, data which is, you know, around 40% on every dollar that is exported from Mexico into the United States is actually a US compliment. That's a figure that has been there for quite some time. So you have to again, if you go into the nitty gritty of the deficit, I think that needs to be taken into account. Since USMCA first negotiation, I think it became clear that the US wanted to capture a bigger chunk of the growth of the auto industry into the future. And I think that is going to be accomplished. I hope it does not. It is accomplished in a way that companies which are really North American, Ford, gm, to mention a few. They operate throughout the Americas. It's done so in a way that they can continue to be competitive worldwide. And if that addresses the concerns by the administration, which I think it's possible, I think we should get to a good place with within a few months, hopefully, or, you know, certainly within the next 12 months.
- [52:46]
David Westin
You talk about certainty. Businesses, certainly United States, Canada and Mexico, want just to know what the rules are, even more than what the rules are specifically. Just know what they are. They stand fast. What are the prospects of that right now? Because there's also, as I understand it, under the terms of usmca, the possibility of, like, every year you get to redo this thing, take another look at it, and goodness knows, President Trump seems to enjoy. Enjoy that process.
- [53:09]
Jatain da Silva
Right?
- [53:10]
Chase Business Representative
Well, I think that if, if the countries come to an agreement to review and then make modifications to usmca, then they have the option of renewing it. And if it is renewed, then the next review comes up in six years, not one year. It sort of extends it for 16 years with another review in six years. So I think that that's the way the clause was created. The cause was created with the understanding that all three parties would come every six years and say, is it still fit for purpose? Do we need to make modifications? We thought that was the right timing for a variety of reasons. And I still do. I mean, we all lived with the NAFTA that became impossible to modify until it wasn't. Until President Trump and, you know, to be fair, he went to a place that people had no, not been willing to go before, which was to open it up and have a good look at it. And that resulted in a much more modern agreement that resulted in an agreement that was much more effective and a mechanism that allows us to look at it every six years. So, ideally, I think that, you know, I think we will work, Canada will work really hard to find some kind of solution that gives us stability, and then we'll look at it again in six years.
- [54:21]
David Westin
What are the prospects of the result of this whenever that happens, being actually in enhanced trade among the three countries? Or is the goal instead just not losing what we already have? Is there any goal of using this offensively to have even more and better trade rather than just, let's not lose what we've got?
- [54:39]
Geronimo Guterres Fernandez
Well, I tend to think that we actually have not seen the benefits of USMCA for a sufficient long period of time. Let me explain why. The agreement went into effect in 2020, right at the time that Covid hit. So that was that immediately affected our economic, business and trade among ourselves after that stabilized, you're beginning to see, in my view, a pickup in trade and employment thanks to that agreement. I think what we're going to see is tremendous benefits for the three countries. Now, again, I'm not naive. We're not there yet. And I think we're going to see. We are seeing our trade increase even with tariffs nowadays. Right. We're seeing investment President Trump wants, naturally, every leader wants, wants as much investment coming into their country. And that's a central part of the discussion. The US invests around $160 billion. That's the stock of US foreign direct investment in Mexico. Mexico, unknown to many Americans, has about 60. If you normalize that by the size of the economy, Mexico is actually investing more in the United States than the United States in Mexico. And there are a lot of Mexican companies willing to invest more. And I think that's the certainty of having the deal for the next 16 years is critical for them and essentially in all sectors, even if you talk to the agricultural sector here in the States, they want that certainty also because they export billions of dollars of grains to Mexico.
- [56:36]
David Westin
That does it for us. Here at Wall Street Week, I'm David Westin. See you next week for more stories of capitalism.
- [56:58]
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