Texas Economy Hangs in Balance as USMCA Renegotiation Falters

The Texas economy is bracing for uncertainty as the USMCA renegotiation hangs in limbo. Mexico and Canada are Texas' No. 1 and No. 2 trading partners, with trade between them totaling $281.2 billion and $69.2 billion respectively in 2024.

Companies like Air Tractor, Inc., which manufactures aircraft for farming and aerial firefighting, rely heavily on parts imported from Canada under the USMCA pact. If the agreement is terminated, a 25% tariff on Canadian engines would force Air Tractor to increase prices by 12%, potentially leading to significant job losses.

President Donald Trump's decision not to renew USMCA and instead review it annually has added to the uncertainty, with bilateral trade talks only taking place between the U.S. and Mexico, but not with Canada.

'We can't afford the risk,' said Tony Payan, director of the Claudio X. Gonzalez Center for the U.S. and Mexico at Rice University's Baker Institute. 'Companies are withholding their investment due to the uncertainty over what would happen with USMCA and the knee-jerk tariff imposition.'

According to Brett Preston, managing partner of Cushman & Wakefield PIRES, domestic companies are being hurt by the tariffs, which will eventually trickle down to consumers in the form of higher prices.