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U.S. Trade Representative Jamieson Greer said that the U.S. will seek to raise tariffs on Canadian and Mexican products in a review of an update of the North American Free Trade Agreement negotiated during the first Trump administration.
“The U.S. is going to have tariffs… I mean, even with somebody like Mexico, or other countries that are in our own hemisphere, we’re going to have tariffs as long as we have a giant trade deficit,” Greer said during a public interview at a think tank in Washington on May 26.
The inclusion of U.S. tariffs on Canadian and Mexican products would be a reversal of the purpose of the free trade agreement, as free trade treaties intend to lower or eliminate tariffs and non-tariff barriers to international trade.
The remarks track with a report Greer delivered to Congress in December, in which he said that reducing trade deficits with Canada and Mexico would be a major goal of the Trump administration’s efforts to renegotiate the U.S.-Mexico-Canada Agreement (USMCA), the current iteration of the North American free trade treaty. USMCA differs from other trade agreements announced by President Donald Trump in that it was ratified by the Senate, included legislative changes negotiated with both chambers of Congress, and is legally binding.
Grant Thornton insight:
The priority of the trade deficit in trade negotiations presents a major hurdle to continuing the continental free trade agreement, under which the vast majority of Mexican and Canadian goods are exempted from U.S. tariffs. As with most countries, the U.S. has a trade deficit with Canada and Mexico, largely due to stronger purchasing power per capita in the U.S. as well as due to the substantial amount of oil, lumber, potash, and other commodities imported from Canada, and the lower cost of goods made in Mexico.
The USMCA is also unique among free trade agreements in that it contains a review process that then subjects it to possible renegotiation, and a longer-term sunset, if all three countries do not sign off on the current agreement by July 1. U.S. trade officials met with Mexican counterparts as part of a first official round of review talks in Mexico City on May 28–29 and will host another round in Washington on June 16–17. A third round is expected to take place the week of July 20.
That implies the July 1 deadline will pass, putting the USMCA into a formal review process, under which its long-term future would be uncertain, and substantial changes — or a breakup — could occur.
Due to ongoing tensions between the Trump administration and the Canadian government dating back to the first imposition of tariffs on Canadian products in February 2025, as well as repeated public references to Canada as the “51st state” by the president and several senior officials and retaliatory tariffs and other actions by the Canadian government, engagement on USMCA review between the U.S. and Canada has been more muted than between the U.S. and Mexico.
“So they’re just in a different spot, and it’s hard to see necessarily where that ends,” Greer said during the May 26 interview, in reference to Canada.
“I think on some of these issues, it’s going to be a challenging negotiation. But in some sectors of the economy, it has been fine, and it will be fine,” the lead U.S. trade negotiator added.
On June 2, Canadian officials told reporters that they presented specific proposals to address U.S. concerns during a meeting that, unlike the talks with Mexico, was not publicized.
“I think we got to be careful not to set up a cliff that doesn’t exist,” Dominic LeBlanc, the minister in charge of Canada-U.S. trade, said, according to the Wall Street Journal. “I remain optimistic about the work that we can work with the Americans, but July 1 is a date where our trading partners will have something to say about that.”
Grant Thornton insight:
The bilateral nature of negotiations tracks with suggestions first made by Greer in December and reiterated since that the U.S. could leave the continental free trade agreement in favor of separate bilateral agreements with Canada and Mexico. This could create added uncertainty and cost for businesses with supply chains or other operations set up across the three countries. Under the terms of the USMCA, any of the three countries can leave the pact with six months' notice.
On June 2 Greer’s agency, the Office of the U.S. Trade Representative, announced the conclusion to a Section 301 investigation that included Canada and Mexico among 60 countries or regional jurisdictions that could face additional tariffs. (See related article in this issue of Tax Hot Topics.) The tariff rates are expected to track with those previously imposed under the International Emergency Economic Powers Act (IEEPA) regime established by the Trump administration in 2025 before being ruled illegal.
The USTR proposed an additional 10% tariff on Canadian and Mexican imports as part of the conclusion of the investigation, which is subject to a comment period and public hearing process.
Greer on China, Section 122 tariffs
In addition to Canada and Mexico, China was also included in the Section 301 investigation, despite a trade war de-escalation between Trump and Chinese President Xi Jinping in October 2025.
Though he spoke before the Section 301 investigation conclusions were announced, Greer said that he did not expect the Chinese government to retaliate over a certain level of tariffs.
“I would say there’s a level that the Chinese would expect,” Greer elaborated. “We kind of know what they can tolerate, so we’re able to continue that balance.”
Trump and Chinese President Xi Jinping reached a temporary détente on the trade war that reignited after Trump imposed new, heightened tariffs on Chinese products beginning in February 2025. The baseline tariff on Chinese imports rose to nearly 150% at one point, before the Supreme Court’s ruling against the law Trump cited to impose the majority of those tariffs, and before a one-year de-escalation reached in October.
After the Supreme Court’s February ruling against the use of IEEPA to impose tariffs, Trump levied a 10% tariff using Section 122 of the Trade Act of 1974, a never-before used law that grants the president temporary authority to impose tariff on imports for a temporary, 150-day window to address a balance of payments or dollar devaluation crisis.
Greer noted that while the statute has a 150-day sunset, the language of the law does not say how long Section 122 tariffs must be lifted.
“When you look at that statute, it says that they expire, but it doesn’t say when you can redo it,” Greer said. “It doesn’t say you can’t reuse it, but it is temporary, there’s some tension in that.”
The Section 122 tariffs are currently subject to a legal challenge similar to the one that led to the Supreme Court’s ruling against the use of IEEPA to impose tariffs. (See related article in this issue of Tax Hot Topics.) A three-judge panel at the U.S. Court of International Trade ruled against the Trump administration’s interpretation of the law in an opinion issued on May 7. The Trump administration is appealing.
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