Workers pick blueberries at the Agrovision berry farm in San Isidro Mazatepec, Jalisco state, Mexico, in 2024. Berry companies in Mexico are facing a shortage of field workers. (Fred Ramos/For The Washington Post)
MEXICO CITY — Over three decades, free trade transformed North America. Mexico became a world-class carmaker. American consumers got cheap, abundant goods, from refrigerators to year-round strawberries. As commerce exploded, production lines zigzagged across the continent.
Now, that seamlessly integrated system is coming undone.
Though Mexico and Canada were exempted from global, across-the-board tariffs announced by President Donald Trump on Wednesday, the two nations are already reeling from earlier measures. They’re facing 25 percent tariffs on steel and aluminum products. There’s a 25 percent tariff on non-American parts in cars exported to the United States. Still another initiative will impose a 25 percent penalty on products that don’t comply with USMCA, the trilateral trade treaty negotiated during Trump’s first term.
Trade experts say the American president is defying the rules of his own agreement and subverting one of its main goals — guaranteeing certainty for investors.
“In practice, it’s being eroded, day in and day out,” said Luis Rubio, president of the México Evalúa think tank.
Follow Trump’s first 100 Days
Trump has imposed the tariffs in an effort to lure manufacturers back to the United States, trim U.S. trade deficits and to pressure Mexico and Canada to crack down harder on fentanyl and migration. But it is likely to mean higher prices for consumers, analysts say — and an economic slowdown in all three countries.
In Canada, Trump’s tariffs, coupled with his repeated threats to use “economic force” to annex the country, have done lasting damage, officials and analysts say.
Speaking at a news conference Thursday, Prime Minister Mark Carney declared that “the system of global trade, anchored on the United States, that Canada has relied on since the end of the Second World War … is over.”
‘A seismic change’
The North American Free Trade Agreement, or NAFTA, took effect on Jan. 1, 1994. Inspired by the European Union, it scrapped barriers to investment and the movement of goods and services across national borders.
It was, Trump said Wednesday, the “worst trade deal ever made.”
Many would disagree. The trade volume between the three countries has more than quadrupled over the past 30 years, surpassing $1.8 trillion in 2023; foreign direct investment has surged. Though the deal was updated in 2020 — and rebranded as the U.S.-Mexico-Canada agreement, or USMCA — it largely hewed to the original outline.
Mexico’s economy was dramatically reshaped.
“We went from being one of the most economically closed countries in the world to being one of the most open — and among the top 10 exporting countries,” said Kenneth Ramos Smith, a former Mexican commerce official who helped negotiate the USMCA. Mexico is now America’s leading trading partner.
For Canada, the free-trade deal built on an earlier pact with the United States, which was struck in 1988 and went into force the following year.
“This was really a seismic change in Canada, but within 10 years, all the provinces … had come to see that international trade, particularly with the United States, was all in their interest,” said Colin Robertson, a former Canadian diplomat in the United States who worked on the 1988 deal.
As the treaties took hold, auto parts flowed back and forth across borders, with manufacturers taking advantage of specialties in each country: Workers in Mexico molded car parts out of Pennsylvania steel, which were then refined by machinists in Detroit or Ontario. Mexican brewers imported barley from Idaho and Montana, then shipped beer to thirsty Americans and Canadians.
In Mexico, the agreement helped expand the small middle class. In the United States, it kept a lid on the price of innumerable goods, from bell peppers to televisions. In all three countries, it meant access to a wider array of products.
“When you were in Mexico in the early 1990s, you could only get about three kinds of cereal, right?” recalled Shannon O’Neil, a Latin America scholar at the Council on Foreign Relations. Now you can buy Pop-Tarts and Pringles at Mexican Walmarts.
In return, Mexico has become the top foreign source of fruit and vegetables in the United States, with the value of its agricultural exports growing nearly 10 percent a year.
The controversy over NAFTA
Yet the free-trade regime always had its critics. In the United States and Canada, NAFTA was blamed for an exodus of manufacturing jobs to Mexico, to take advantage of cheap labor. In Mexico, it was seen as responsible for the widespread failure of small family farms — prompting the poor to migrate to cities, and turning the country into a net importer of corn, its most iconic food.
Despite predictions that NAFTA would supercharge growth in Mexico, the country’s economy has remained plodding — expanding by an average of only 2 percent per year for the past two decades.
Rubio says the figure masks a more complex reality. Export-oriented states in northern and central Mexico have flourished, with annual growth rates of 6 percent or more, he said, while the economy has stagnated in the poorer south.
NAFTA’s implementation also coincided with other major economic changes. China joined the World Trade Organization in 2001, unleashing a flood of cheap exports that undercut U.S. manufacturers. Increased automation helped contribute to the loss of American factory jobs.
Many economists contend that U.S. companies such as General Motors and Ford became more competitive internationally by being able to outsource part of their production to Mexico.
“We might not even have a U.S. auto industry if there hadn’t been North American production,” O’Neil said.
Can free trade survive?
Some analysts said USMCA has, for now, protected Mexico and Canada from harsher consequences under Trump’s “reciprocal tariffs” plan.
“The treaty has been maintained, and this is a major achievement — not something we could have taken for granted,” Mexican Commerce Minister Marcelo Ebrard said Thursday.
Mexico has kept its duty-free status for major goods, including agricultural products, textiles and electronics — as long as they comply with the free-trade treaty. Currently, about half of Mexico’s exports are sent under World Trade Organization rules, which had also provided low or zero tariffs and required less red tape. Now, producers not covered under USMCA are scrambling to get their paperwork in order.
Some economists have speculated that Mexico may actually increase its U.S. market share, because it will face lower tariffs than many countries targeted on Wednesday.
But the free-trade treaty is scheduled for a review next year. And while several Canadian premiers have urged an early renegotiation of the USMCA, some officials and analysts wonder about the value of future talks after Trump’s violation of a deal he brokered.
“It raises the question about what is the worth of his signature on any agreement that we come to,” said Perrin Beatty, a former Canadian foreign minister and the former president of the Canadian Chamber of Commerce.
Rubio recalled that one of NAFTA’s original goals was to provide guarantees for investors wary of abrupt political shifts in Mexico, by tying the country to the United States — “an anchor of stability.”
“No one imagined, when we negotiated the treaty,” he said, “that the problem would come from there.”
Coletta reported from Toronto. Gabriela Martínez and Valentina Muñoz Castillo contributed to this report.