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Andrew Schneider\/Houston Public Media<\/p>\n
Flags of the U.S., Canada, Mexico and Texas hang at ARC Specialties in Houston on Nov. 16, 2017.<\/p>\n
It’s hard to overstate just how much Texas has riding on a successful renegotiation of the United States-Mexico-Canada Agreement, or USMCA<\/a>. Mexico and Canada are Texas’ No. 1 and No. 2 trading partners, respectively, just as they are for the U.S. as a whole. And that doesn’t take into account direct investment in Texas by Mexican and Canadian companies.<\/p>\n All that trade and investment means that thousands of Texas jobs depend on the smooth flow of goods and services between the U.S. and its southern and northern neighbors. So, too, does the competitiveness of North America in the world economy as a whole.<\/p>\n Sign up for the Hello, Houston!<\/a> daily newsletter to get local reports like this delivered directly to your inbox.<\/p>\n Since July 1, when the Trump administration announced it would not renew the USMCA<\/a> and instead put the agreement under annual review, the U.S. has held bilateral trade talks with Mexico but not with Canada. In the meantime, ratcheting up the pressure, President Donald Trump has announced a new 10% tariff on a fraction of Mexican imports and 50% tariffs on a range of Canadian imports<\/a>, including cars and trucks.<\/p>\n “The problem is not for Washington or Mexico City or Ottawa,” said Tony Payan, director of the Claudio X. Gonzalez Center for the U.S. and Mexico at Rice University’s Baker Institute<\/a>. “The problem is for businesses, because a lot of these companies \u2014 manufacturers, energy companies \u2014 they\u2019ve got long-term plans. They have to plan ahead 5, 10 years. And now they have to learn to live with the uncertainty of investments that may not be covered by the agreement whenever that is ratified, if it all.”<\/p>\n Click here for more inDepth features.<\/a><\/p>\n \u201cIt\u2019d be tough\u201d<\/p>\n In 2024, two-way trade between Texas and Mexico<\/a> came to $281.2 billion, while trade between Texas and Canada<\/a> came to $69.2 billion. Taken together, that’s equivalent to 12% of the state’s economy. Texas’ main exports to Mexico and Canada are oil and natural gas products \u2013 but its manufacturing, particularly of vehicles, depends heavily on parts imported from both countries. Texas’ and Mexico’s economies have been historically integrated, but that doesn’t mean they wouldn’t suffer if the USMCA dies. That’s even more the case with Texas’ ties with Canada.<\/p>\n Air Tractor, Inc. is a prime example of a company that has thrived thanks to USMCA. Based in the small North Texas city of Olney, the company makes aircraft for farming and aerial firefighting. It sells to customers throughout the U.S. and in more than 50 countries across the world.<\/p>\n “The USMCA and the old NAFTA in particular help facilitate a relationship with our engine supplier, Pratt & Whitney Canada,” said Air Tractor’s president and CEO, Jim Hirsch. “Our engines that come from Pratt & Whitney in Canada potentially could be subject to a 25% tariff. The engine in our airplanes represents approximately half the value of the airplane.”<\/p>\n Kevin Brown<\/p>\n Jim Hirsch (right), president and CEO of Air Tractor, Inc., inspects one of his company\u2019s aircraft in production.<\/p>\n The USMCA pact means Air Tractor can import engines from Canada without paying that tariff. So, when Trump publicly said the U.S. would be better off without USMCA, Hirsch was understandably concerned. He said if USMCA were terminated, the return of the tariff on Canadian aircraft engines would force him to increase the price of his planes by 12%.<\/p>\n “It\u2019d be tough. It would take deep cuts in staff and supply,” Hirsch said. “We know the order book would just decline sharply. We don\u2019t know how sharply. Is it 50% loss in orders or greater? We just don\u2019t know, but we know it would be significant. Whether we could survive it or not, not quite sure.”<\/p>\n The company employs more than 400 people across North Texas. Those jobs, and many more, hang in the balance.<\/p>\n \u201cWe can\u2019t afford the risk\u201d<\/p>\n Payan said Trump is likely pushing for maximum leverage rather than aiming to kill the USMCA. Even if Trump were to announce he intends to terminate the agreement, which he has not done, the agreement would remain in force for another 10 years, while trade negotiations would continue on an annual basis.<\/p>\n “He\u2019s got other issues with Canada, he\u2019s got other issues with Mexico City, and so there is no incentive for him at this minute to actually ratify the agreement,” Payan said.<\/p>\n Among other goals, Trump wants to bring more manufacturing back to the U.S. He\u2019s had some success on that front as Toyota recently announced it was shifting 2,000 jobs<\/a> from Tijuana to San Antonio.<\/p>\n “Some of these companies are taking this very seriously and saying, \u2018You know what? We\u2019re going to assemble back in the States. We can\u2019t afford the tariffs or the duties, and we can\u2019t afford the risk regardless of how USMCA shakes out,'” said Brett Preston, managing partner of the El Paso commercial real estate firm Cushman & Wakefield PIRES.<\/p>\n![\"Jim](\"https:\/\/www.europesays.com\/canada\/wp-content\/uploads\/2026\/08\/Jim-Hirsch_Air-Tractor_4-1000x667.jpg\")
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