{"id":12543,"date":"2026-07-02T15:03:57","date_gmt":"2026-07-02T15:03:57","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=12543"},"modified":"2026-07-02T15:24:16","modified_gmt":"2026-07-02T15:24:16","slug":"usmca-decision-puts-trade-policy-back-in-focus","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-week-ahead\/usmca-decision-puts-trade-policy-back-in-focus\/","title":{"rendered":"USMCA decision puts trade policy back in focus"},"content":{"rendered":"\n
\n
\n
\n
\n
\"\"<\/figure>
\n

Next week we turn our attention back to trade data following the recent decision by the administaration not to renew USMCA. And we expect that the trade data for May will show a significantly wider (-$79.1 billion) trade deficit<\/strong>, which would mark the deepest deficit since Q1 2025.<\/p>\n<\/div><\/div>\n<\/div>\n<\/div>\n\n\n\n

The Advanced goods report flagged a $105.8 billion goods deficit \u2013 a 14 month high \u2013 driven by a surge in consumer products, industrial supplies, and auto imports while exports fell. The trade deficit is still well-below pre-pandemic levels, moving in the wrong direction for an administration that has focused its agenda on closing the gap. But the composition of what\u2019s driving the trade deficit matters and with AI demand surging, the deficit shows few signs of narrowing.<\/p>\n\n\n\n

On the policy side, the landscape remains in flux. After SCOTUS overturned IEEPA<\/a> in late February, the administration pivoted to blanket 10% tariffs on all global imports under Section 122, effective February 24th \u2014 but those are set to expire after 150 days (on July 24th). Congress can vote to extend tariffs under Section 122, but that is unlikely. As we wrote before,<\/a> the administration has other options available to pursue their trade agenda, and there are numerous country-specific (under Section 301) and product-specific investigations (under Section 232) underway. But to date, tariffs haven’t delivered the deficit reduction for which they were intended. Part of what\u2019s working against deficit reduction is the AI infrastructure buildout which continues to drive demand for capital goods. Just under 30% of goods imports are now computers and electronics products \u2013 double the share pre-2024. The April import surge was overwhelmingly a computers and electronic products story, and  we expect that this will continue to be the case in May.<\/p>\n\n\n\n

The manufacturing sector trade balance hit its lowest level ever after tariffs were imposed and remains deeply negative. While PPI<\/a> for intermediate electronic components & accessories have soared as of late, upticks in capital goods imports is not exclusively a price story. Real capital goods imports rose +3.2% in April, suggesting that even stripping out price effects yields a material rise in real import volumes. A massive dip in the trade deficit in Q4 coincided with a significant uptick in real non-residential equipment investment. At the end of Q4, a sizeable dip in the trade deficit foreshadowed a massive uptick in real non-residential equipment investment in Q1. If computer and electronic product imports continue at the current pace through Q2, this would support another strong quarter for business investment. Indeed, tariffs are not curbing the appetite to support the buildout of AI infrastructure.<\/p>\n\n\n\n

\"RBC\n\t\t\t\n\t\t\t\t\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n\n\n\n

Here\u2019s what else we\u2019re watching next week:<\/p>\n\n\n\n