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The “multipolar” world has been a reasonably popular framework for thinking about the global economy. The idea was that the world economy was sorting itself into three geographically defined regions: a North American group, a European group, and an East Asian group. Each group of countries had a combination of traits: a sufficient amount of industry and technological leadership in many areas, a mix of skilled and unskilled labor, access to natural resources. In addition, the three regions had the advantages of geographic proximity, and relatively free trade within the area, so that goods and services could flow back and forth with some ease.

For some earlier discussions of this idea here, see “NAFTA in a Multipolar World Economy” (August 11, 2017) and “A North American Vision” (November 5, 2014).

From this perspective, a main concern with President Trump’s threats to set off a trade war with Canada and Mexico is that it threatens to fracture the North American bloc. However, Germany and western Europe will remain at the heart of the European bloc, while a combination of China, Japan, and Korea will remain at the heart of the Asia bloc. The implicit belief that

After all, President Trump negotiated and signed the United States-Mexico-Canada Agreement (USMCA) in 2020 during his first term, to address his concerns about the earlier North American Free Trade Agreement. It’s worth quoting some of Trump’s comments during the signing ceremony in 2020:

The USMCA is the largest, fairest, most balanced, and modern trade agreement ever achieved.  There’s never been anything like it.  Other countries are now looking at it, but there can’t be a border like that because, believe it or not, that is by far the biggest border anywhere in the world, in terms of economy, in terms of people.  There’s nothing even close.

This is a colossal victory for our farmers, ranchers, energy workers, factory workers, and American workers in all 50 states … The USMCA is estimated to add another 1.2 percent to our GDP and create countless new American jobs.  It will make our blue-collar boom — which is beyond anybody’s expectation — even bigger, stronger, and more extraordinary, delivering massive gains for the loyal citizens of our nation.

For the first time in American history, we have replaced a disastrous trade deal that rewarded outsourcing with a truly fair and reciprocal trade deal that will keep jobs, wealth, and growth right here in America.  And, in a true sense, it’s also a partnership with Mexico and Canada and ourselves against the world.  It’s really a trade partnership, if you look at it that way.  And it’s a day of great celebration in all three countries.

For some perspective on what can be lost by fracturing the North American trading bloc, the Brookings Institution has published USMCA Forward 2025, a collection of seven essays and additional short comments about some of the positive gains from Trump’s trade agreement. As Joshua P. Meltzer and Brahima Sangafowa Coulibaly point out in their introduction to this volume, U.S. exports to Mexico and Canada have increased by 46% since the USMCA agreement was signed in 2020.

This set of essays focuses on a few key areas of interest for the North American Trade bloc. One is critical minerals. Meltzer and Coulibaly note:

Critical minerals and rare earths are key inputs into the production of many technologies, such as batteries, mobile phones, and semiconductors and needed for defense purposes. … The challenge for North America is the heavy dependence on many of these minerals from China, particularly when it comes to processing. The Trump administration has also made secure supply chains a focus, and this will require addressing the heavy reliance on China for critical minerals. China’s recent announcement that it will restrict exports of various critical minerals to the U.S. in response to U.S. tariffs further underscores the strategic need for the U.S. to reduce this dependency. … [T]he U.S. is 100% reliant on imports of 16 critical minerals such as graphite and more than 50% reliant on imports for another 29 critical minerals, including rare earths, zinc, and nickel. About 40% of U.S. import of critical minerals come from Canada and Mexico. Moreover, the U.S., Canada, and Mexico have largely complimentary resources, meaning that U.S. support for the development of critical minerals and rare earths in Canada and Mexico does not compete with U.S. production but can replace existing dependencies on China. 

In short, if the US is going to be a world leader in technologies like batteries, mobile phones, and semiconductors, it needs easy access to minerals across the North American trade bloc. Moreover, if US manufacturing in these and other areas is to set the standard for global productivity, the US business sector needs to be able to locate different pieces of the goods and services supply chain across the US, Canada, and Mexico in ways that can boost efficiency.

I was pleased back in 2020 by the passage of the USMCA, since it seemed to assuage President Trump’s worries about the NAFTA agreement, while still supporting the North American trading bloc. Import tariffs aimed at China at least have the rationale of being aimed at a country where the US is involved with economic and geopolitical competition. But in Trump’s words from 2020, USMCA is “a partnership with Mexico and Canada and ourselves against the world” and “a truly fair and reciprocal trade deal that will keep jobs, wealth, and growth right here in America.”

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