The Trump administration isn’t backing down on North American tariffs. US Trade Representative Jamieson Greer announced on May 26 that tariffs on imports from Canada and Mexico will remain in place, citing a persistent trade deficit as the core justification.
The message to America’s two largest trading partners was clear: the era of frictionless cross-border commerce under the USMCA is, at minimum, on pause. And with a mandated review of the trade agreement set to kick off in July 2026, the administration appears to be using tariffs as leverage heading into what could be a contentious renegotiation.
The trade deficit argument
Greer’s rationale centers on a straightforward number. The US still runs a trade deficit with its USMCA partners, meaning it imports more from Canada and Mexico than it exports to them. In Washington’s current framing, that imbalance represents a problem that tariffs are designed to fix.
There is some movement in the direction the administration wants. The trade deficit with USMCA partners has decreased by 24% since April 2025, according to Greer. That’s a meaningful decline, but apparently not enough to warrant lifting the tariffs.
Greer was notably blunt about the upcoming review process. He indicated the US will not “rubber stamp” the USMCA’s status quo, signaling that the administration views the July 2026 review as an opportunity to push for structural changes rather than a procedural formality.
The USMCA replaced NAFTA when it took effect on July 1, 2020. It was originally championed by the first Trump administration as a modernized deal that would better protect American workers and manufacturers.
Different approaches for different neighbors
One of the more interesting dynamics in Greer’s comments was the distinction drawn between Canada and Mexico. The USTR indicated that separate discussions with each country are likely, with Mexico described as showing more openness to dialogue.
Greer signaled a willingness to explore bilateral agreements or adjustments to existing rules. Two areas of focus stand out: rules of origin, which determine whether a product qualifies for tariff-free treatment based on where its components were made, and external tariffs that affect goods routed through North America from other countries.
The administration is also pushing for reforms that emphasize US-based content in manufacturing. This aligns with a broader industrial policy aimed at reshoring production, a theme that has defined trade policy across both Trump administrations.
What this means for markets and crypto
Tariffs are, at their core, a tax on imports. When maintained over extended periods, they tend to raise costs for businesses that rely on cross-border supply chains. Those costs often get passed along to consumers, contributing to inflationary pressure.
For traditional markets, the persistence of North American tariffs creates a cautious backdrop. Companies in the auto sector, agriculture, and manufacturing, all deeply integrated across the US-Canada-Mexico corridor, face continued uncertainty about input costs and market access.
The bond market cares too. If tariffs contribute to stickier inflation, the Federal Reserve has less room to cut interest rates. Higher-for-longer rates generally create headwinds for risk assets across the board.
The 24% reduction in the USMCA trade deficit since April 2025 suggests the tariffs are having their intended effect, at least by the administration’s own metrics. But investors should watch the July 2026 review closely. If negotiations break down or the US escalates tariff rates further, the ripple effects through commodity markets, supply chains, and ultimately risk appetite could be significant.