As manufacturers consider fresh investments in domestic production, automation, and reshoring, trade stability is emerging as a key factor in deciding where to source parts and locate final assembly operations.
The U.S.-Mexico-Canada Agreement, known as USMCA, is approaching its first official review on July 1. The results could influence supply chains, production strategies, and long-term investment plans throughout North America.
Industry experts worry that the Trump administration’s view that Canada and Mexico are not treating the U.S. fairly in some areas could make the renewal process more difficult.
“We need to maintain this partnership and keep improving it, not threaten it with a breakup,” says Patrick Lozada, Senior Director of Global Policy at the National Electrical Manufacturers Association.
While recognizing there are valid concerns to address during the upcoming USMCA review, he emphasizes that manufacturers still require the long-term stability and interconnected North American supply networks that the agreement delivers.
The agreement establishes guidelines for how parts qualify to cross borders without tariffs. Lozada notes that this framework has encouraged manufacturers to expand their investments across North America.
NEMA is calling on all three governments to extend the agreement for another 16 years, while continuing to use existing channels to settle disputes and revise sections of the agreement as needed.
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“A long-term renewal wouldn’t mean a frozen agreement,” Lozada explains. “But it would give manufacturers a clear sense of direction and predictability.”
That predictability matters especially for electrical manufacturers because the industry depends on a tightly connected North American value chain.
“USMCA has enabled us to connect design, engineering, manufacturing, assembly, testing, certification, and services across all three countries,” Lozada says.
He adds that this integration has also helped the sector lessen its dependence on China.
“Since 2018, China’s share of electrical industry imports to the U.S. has dropped by 49%,” Lozada notes.
Electrical manufacturing is also growing in importance as AI, data centers, automation, and advanced manufacturing continue to expand.
“Electrical components make up roughly one-third of the total cost of building a typical AI data center,” Lozada says. They also account for about 10% of the total cost of constructing a new U.S. manufacturing plant.
NEMA forecasts that U.S. electricity demand will rise by 55% by 2050, with data centers being a primary contributor. Lozada says AI data centers alone are projected to triple their share of energy demand over the next decade.
“We need a power grid that can keep up with this dramatic surge in demand,” Lozada says.
Trade uncertainty, however, can hinder those investments. Lozada points out that fluctuating tariff rates are particularly challenging for manufacturers mapping out long-term production plans.
“If you’re paying 0% under a trade deal one day, then suddenly facing a 25% tax the next, and then a 10% tax after that, it’s poison for long-term planning,” he says.
Lozada says NEMA also views the USMCA review as a chance to tackle standards and regulatory challenges, particularly in Mexico. He notes that Mexico has not updated its electrical code since 2012, putting it three editions behind the U.S. and Canada.
“No one supports an outdated electrical code,” Lozada says. “No one should accept standards that are behind the times.”
If USMCA remains in uncertainty after the review, Lozada expects manufacturers and investors may see ongoing negotiations as manageable in the short term but inadequate for long-range planning.
Predictability, Lozada says, is essential for manufacturers thinking about adding new production capacity, launching new lines, or building new facilities.
“Manufacturers want clarity on what they’ll be paying,” Lozada says. “What they’ll pay in tariffs and taxes on their inputs, and which markets they’ll be able to reach.”
NEMA is also pushing for a tariff incentive program that would offer tariff reductions or rebates for companies investing in U.S. manufacturing.
“If you’re investing in America and bringing manufacturing back home, let’s give you a break on those tariffs,” Lozada says.
According to Lozada, such a program could help accelerate U.S. manufacturing investment while keeping costs manageable for both manufacturers and consumers.
