Key Takeaways
- •The House voted to repeal Donald Trump's tariffs on Canada, imposed without Congressional support, signaling growing bipartisan opposition to such unilateral actions despite USMCA's broad backing.
- •Eric Gottwald (AFL-CIO) stated USMCA is failing workers due to Mexico's low wages and poor labor enforcement, leading to a doubled trade deficit and corporate offshoring to Mexico.
- •Senator Wyden (D-OR) pressed Kevin Brady on President Trump's statements calling USMCA "irrelevant," to which Brady responded that Trump's aggressive style aims to rebalance trade and boost the U.S. economy.
- •Republicans largely praised USMCA's economic benefits and competitiveness against China, while Democrats criticized the Trump administration's lack of enforcement and chaotic tariffs undermining the agreement.
- •The upcoming 2026 joint review offers a critical opportunity to strengthen USMCA's enforcement, address specific non-compliance issues, and counter Chinese influence, ensuring long-term business certainty.
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Hearing Analysis
Overview
On February 12, 2026, the Senate Finance Committee held a hearing to evaluate the performance and future of the U.S.-Mexico-Canada Agreement (USMCA) as the treaty approaches its first mandatory six-year joint review. Chairman Mike Crapo (R-ID) opened the session by highlighting the agreement’s historic bipartisan support and its role in supporting 13 million American jobs. He noted that since the USMCA’s inception, investment from Canada and Mexico into the U.S. has increased by 55 percent, reaching $775 billion. However, the hearing also underscored significant friction regarding the Trump administration’s recent imposition of tariffs on North American partners and the upcoming 2026 review process, which will determine whether the agreement is extended for another 16 years.
Key Testimony
The witness testimony presented a divide between those advocating for the agreement’s preservation for the sake of business certainty and those demanding significant reforms. Kevin Brady, a former Chairman of the House Ways and Means Committee and current consultant at Akin, described the USMCA as the "gold standard" of trade deals. He argued that Canada and Mexico are now America’s top customers, investors, and suppliers, providing a critical bulwark against Chinese economic aggression. Brady warned that scrapping the partnership would be counterproductive, especially as China seeks to exploit any cracks in North American integration.
In contrast, Eric Gottwald, a policy specialist for the AFL-CIO, argued that the USMCA is failing to deliver for workers. He cited an explosion in the U.S. trade deficit with Mexico—from $125 billion to $263 billion—and noted that major companies like John Deere and Stellantis continue to offshore production. Gottwald criticized the Mexican government for underfunding labor courts and failing to dismantle "protection contracts" that suppress wages. He stated the AFL-CIO would oppose a 16-year extension unless the agreement is reformed to include a regional minimum wage for the auto sector and stronger environmental enforcement.
The automotive and agricultural sectors were central to the discussion. Paul McCarthy, President and CEO of MEMA (The Vehicle Suppliers Association), testified that U.S. parts production increased by $37 billion between 2019 and 2024 due to the USMCA’s stringent rules of origin. He emphasized that the "certainty" provided by the agreement is essential for long-term R&D and capital investment. Representing the dairy industry, Ted Vander Schaaf, a dairyman from Kuna, Idaho, and board member for Darigold, expressed frustration with Canada’s administration of tariff-rate quotas (TRQs). He alleged that Canada reserves quotas for domestic processors who have no incentive to import U.S. product, thereby undermining the market access promised in the agreement. Vander Schaaf also urged the U.S. to protect "common names" for cheeses, such as Parmesan and Feta, against European Union efforts to monopolize those terms in the Mexican market.
Overview
Partisan dynamics were evident throughout the hearing, particularly regarding the executive branch’s use of tariffs. Ranking Member Ron Wyden (D-OR) criticized the Trump administration for failing to initiate a single enforcement case under the USMCA while simultaneously "slapping tariffs everywhere in sight." Wyden argued that these "chaotic" tariffs on Canada and Mexico undermine the very business certainty the USMCA was designed to create. Senator Maria Cantwell (D-WA) echoed these concerns, suggesting that the administration’s rhetoric and 100 percent tariff threats against Canada were a strategic mistake that could drive allies toward China.
Republicans generally defended the administration’s "tough negotiator" stance but expressed their own concerns about maintaining the trilateral framework. Senator John Cornyn (R-TX) focused on the need to use the 2026 review to address Mexico’s compliance with the 1944 water treaty, which impacts South Texas farmers. Senator Steve Daines (R-MT) and Senator Todd Young (R-IN) emphasized the importance of the USMCA in securing critical mineral supply chains and preventing Chinese "transshipment"—the practice of routing Chinese goods through Mexico to avoid U.S. duties. Senator Bill Cassidy (R-LA) raised the issue of national security, questioning how the U.S. can prevent Chinese-manufactured "connected vehicle" software from entering the country via Mexican-assembled cars.
Notable Exchanges
Notable exchanges occurred regarding the "Rapid Response Mechanism" (RRM), a tool used to address labor violations at specific facilities. While Mr. Gottwald praised the RRM but called for its expansion to environmental issues, Senator Sheldon Whitehouse (D-RI) pushed for facility-specific enforcement to prevent a "race to the bottom" on environmental standards. Additionally, a lighthearted but pointed exchange occurred between Senator Wyden and Mr. Vander Schaaf over whether Oregon or Idaho produces better potatoes, highlighting the regional agricultural interests at stake in trade negotiations.
Overview
The hearing concluded with a consensus that the 2026 joint review is a pivotal moment for North American trade. While business and agricultural groups are pushing for a swift extension to preserve investment stability, labor groups and some lawmakers intend to use the "sunset clause" as leverage to force concessions on labor rights, environmental standards, and Chinese investment screening. Chairman Crapo and Ranking Member Wyden both signaled that the Finance Committee would continue to assert its constitutional authority over trade to ensure the U.S. Trade Representative (USTR), currently led by Ambassador Jameson Greer, aggressively enforces existing commitments before the review deadline.
Transcript
[Gavel sounds.] This hearing will come to order. Thank you all for joining us today for this timely hearing on the U.S.-Mexico-Canada Agreement, or USMCA. Almost exactly six years ago, Congress and the president approved the USMCA, and Senator Wyden and Senator Grassley and Senator Hatch were very instrumental in negotiating and helping to bring that to the finish line. The Senate overwhelmingly endorsed this agreement 89 to 10, the most bipartisan vote ever taken in the Senate on a free trade agreement. This demonstrates the broad support for the trade deals that expand jobs, wealth, and growth in the United States. Six years later, we are now on the road to the agreement's first joint review, where we can assess whether the USMCA commitments deliver as intended. The answer is largely yes. Overall, the USMCA protects American jobs, strengthens domestic manufacturing, and continues to grow the U.S. economy. For example, trade with Canada and Mexico supports 13 million American jobs. That's roughly the population of the entire Pacific Northwest. Moreover, since the enactment of the USMCA, $775 billion were invested in the United States from Canada and Mexico, which is a 55 percent increase from pre-USMCA levels. USMCA propelled the United States to export $60 billion in agricultural goods to Canada and Mexico, which represents one-third of all U.S. agriculture exports. Is USMCA a perfect agreement? No. But no agreement ever is. For instance, I have long called for more robust enforcement of USMCA commitments, including but not limited to ag biotech, dairy, digital trade, energy, financial services, and intellectual property. In fact, both chambers of Congress approved USMCA with large bipartisan majorities largely because of its strong rules and mechanisms necessary to enforce those rules. It is therefore critical for the United States to ensure that all its stakeholders, including U.S. farmers, businesses, and workers, fully benefit from the USMCA. I appreciate and commend President Trump and Ambassador Greer's unwavering commitment to enforce the agreement, and I look forward to working with them in that effort. But as the USMCA review process proceeds, it is wise also to remember to not let the perfect become the enemy of the good. Mexico and Canada are two of our most important trading partners. That strong partnership will continue to drive forward America's economic competitiveness. This trilateral relationship should not be taken for granted. This message is generally reflected in the 1,500 comments submitted to the U.S. Trade Representative in December. As Ambassador Greer recently acknowledged during a finance briefing on the USMCA, many stakeholders expressed support for the USMCA and many explicitly called for the agreement to be extended in those comments. Many of those public comments conveyed the singular importance of business certainty, which is best achieved by timely conclusion to the review and an extension of the agreement. Today's hearing is an opportunity to continue conversations necessary to deliver on USMCA and business certainty in the United States. I look forward to hearing what our knowledgeable witnesses have to say as we evaluate the issues underlying this first joint review. And with that, I want to say I also want to again thank Senator Wyden for the work that he did when he was in the leadership of this committee with Senators Grassley and Hatch as you put this agreement over the finish line in the Senate and look forward to working with you as we try to move forward on this review process. Senator Wyden.
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