By Erin McLaughlin
When you think of America's trade with its neighbors, you probably think of car parts and tomatoes driven across the southern border with Mexico and oil piped across the northern border with Canada.
Those things still happen, but the explosive AI data-center buildout happening in the U.S. means North American trade increasingly looks more like computer parts and electric machinery. In the past year, total North American trade in computer and electric parts and machinery surged by 25%, while trade in cars, agriculture, and traditional manufacturing declined.
In the U.S., data-center construction has increased by 350% since 2020 and is estimated to account for 30% of U.S. economic growth this year. That is why the future of the U.S.-Mexico-Canada trade agreement, which allows for tariff-free trade between the three countries on key products needed for the AI buildout, is so important to protect.
The first Trump administration signed onto the trade pact in 2018. The second Trump administration has repeatedly said it isn't interested in renewing the agreement when it comes up for review on July 1. It has become increasingly clear that, at a minimum, major changes to the USMCA are on the table — even though altering or ending the agreement could hurt the AI buildout that is helping hold up the U.S. economy.
The economy has fundamentally changed since USMCA was enacted. AI and advanced manufacturing have reshaped global investment patterns, altered supply chains, and accelerated strategic industries that were still in early development stages six years ago.
Through that change, USMCA has provided a sense of certainty and clarity for businesses, fueling a wave of nearshoring. Manufacturers have invested billions of dollars in integrated production networks: U.S. innovation and capital, Canadian critical minerals and energy, and Mexico's manufacturing base. Investments were made with the expectation that goods, components, and capital could move predictably across borders for decades, without the cost of tariffs or excess regulation. That certainty is now in question, at exactly the wrong time.
Just after the USMCA was enacted, the world entered an era of heightened volatility and escalating geopolitical instability, including pandemic-driven supply chain disruptions, several wars, maritime chokepoints, and intensified competition with China. Against this backdrop, Canada, Mexico, and the U.S. share that common goal of building more resilient and shorter cross-border supply chains that reduce the region's dependence on geopolitical rivals while supporting domestic growth and national security.
The next phase of North American integration should build upon that foundation. It should recognize that AI infrastructure, advanced manufacturing, and data centers are no longer emerging industries. They are the backbone of modern economic competitiveness. For the U.S. to continue as the global leader, there must be predictable trade rules that encourage companies to invest across the continent.
Yet it looks like the July 1 deadline for a USMCA renewal will pass without formal, trilateral discussions. The lack of clarity around the pact's renewal signals there may instead be bilateral agreements made between the countries at a later date, which could raise costs throughout North American supply chains, increase producer inflation, and weaken one of the region's greatest competitive advantages: its economic integration.
If policymakers allow uncertainty to dominate the the status of the USMCA or its negotiations, investment decisions may be deferred, halted, or canceled. Advanced-manufacturing campuses and data centers require capital commitments in the billions of dollars. Planning, permitting, and construction can take up to a decade before production even begins. Investors undertake these projects only when they believe stable market access will exist throughout the life of designing, constructing, and operating a new facility. Any perception that North America's trade architecture is becoming unstable risks delaying those decisions, with effects that will be felt for decades.
The July review should result in a strong, trilateral agreement that focuses on tomorrow's economy. That will send a powerful signal to investors globally that North America intends to compete as an integrated economic region — and that the U.S. is still a global leader.
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Erin McLaughlin is a senior economist at The Conference Board
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