Canada’s now-rescinded intention to move forward with a digital services tax just days before the fifth anniversary of the United States-Mexico-Canada Agreement (USMCA) served as a timely reminder of the pressures facing the agreement. Although Canada reversed course, the proposal itself raises an important question about what could have been, and it should serve as a wake-up call. With the upcoming review of the agreement in 2026, the pressing question is what needs to be modified so that the agreement truly serves America’s interests. 

Between the US, Canada, and Mexico, commerce has grown by 50 percent, reaching over $1.2 trillion annually. The bloc’s combined GDP now exceeds $26 trillion. On the digital commerce front, trade now contributes approximately $20 billion annually to the American economy. These numbers alone show that now is not the time to pull back or make trade in the bloc more cumbersome, whether through tariffs or non-tariff barriers. 

Since the agreement evolved from NAFTA in 2020, its new chapters, including Chapter 19 on digital trade, have been viewed as a blueprint for future trade deals. The hype was real. And, by many measures, the agreement has delivered concrete results. 

Additionally, a quick review of the data indicates that the USMCA has led to significant trade diversion from China to Mexico and Canada. US exports inside the bloc have also surged since the deal’s inception. Specifically, US goods trade with Mexico and Canada has been 44 percent higher than US goods trade with China. In 2023, Mexico, not China, consolidated its spot as the United States’ top trading partner. That same year, US imports from Mexico saw a 17.5 percent increase.

In comparison, imports from China fell by more than 7 percent,........

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