To address complex new topics like AI, policymakers may opt for flexible side agreements instead of amending the USMCA text. This path introduces substantial enforcement risk as these agreements would lack formal congressional approval.

Given that trade policy can shift unpredictably, rushing to execute multi-year supply chain changes is a high-risk move. According to Flexport's CEO, staying calm and doing nothing can be a radical but wise action until the policy environment stabilizes and provides more clarity.

Businesses respond to the uncertainty of trade policy by adopting an "efficiency mindset." Rather than hiring, which carries risks in an uncertain environment, firms are making "no regrets" investments in automation and efficiency. These improvements provide benefits regardless of future tariff levels, making them a safer bet than expanding payroll.

The expected outcome will maintain Mexico's critical tariff-free access to the U.S., supporting current manufacturing. However, it will fall short of providing the strategic updates needed to catalyze a full-scale acceleration of near-shoring.

The most crippling aspect of the ongoing tariff saga is the uncertainty it creates. The inability for businesses, especially small ones, to conduct long-term planning due to unpredictable policy shifts is more economically damaging than the direct financial cost of the duties.

Businesses can adapt to stable, even unfavorable, policies. However, constant, unpredictable policy changes create an environment of ambient chaos where long-term capital investment is impossible. The lack of continuity, not the specific tariffs, is the primary reason industrial construction spending has turned negative.

The review is expected to maintain the core trade agreement and resolve disputes, but ambitious updates on AI, critical minerals, or China will be postponed or handled via less formal side agreements, thus limiting the full potential of near-shoring.

While a single tariff hike is a one-time price shock, a policy of constantly changing tariffs can become a persistent inflationary force. The unpredictability de-anchors inflation expectations, as businesses and consumers begin to anticipate a continuous series of price jumps, leading them to adjust wages and prices upwards in a self-reinforcing cycle.

The Bank of Canada has identified the USMCA trade renegotiation as a significant Canada-specific downside risk. With reports of slow progress, this uncertainty creates a bearish skew for the Canadian dollar, as it could force the central bank to adopt a more dovish stance or even ease policy in the future, contrary to current market pricing.