The Trump administration has formally initiated the renegotiation procedure for the United States-Mexico-Canada Agreement (USMCA), a move that could trigger a reconstruction of North American trade patterns and inject new volatility factors into the US Dollar. The US Trade Representative's Office plans to publicly seek comments on agreement revisions within this month, with the procedure required to be completed by October 4 under the 2020 implementation law.
Trade Policy Becomes USD's Hidden Driver While Federal Reserve monetary policy remains the primary driver of the US Dollar, historical data shows that major trade policy adjustments often trigger 3%-5% fluctuations in the Dollar Index. This renegotiation involves core provisions including automotive rules of origin and agricultural market access. Should the US unilaterally raise trade barriers, it could drive safe-haven funds back into the dollar. The Dollar Index currently trades at 98.08, showing significant recovery from monthly lows, partially reflecting market expectations for trade protectionism policies.
Negotiation Timeline Harbors Volatility Risks According to agreement provisions, the formal renegotiation process will last several months: public hearings must be held before January 2026, with the first trilateral review meeting scheduled before July 1. TD Securities foreign exchange strategist Ned Rumpeltin notes: "This multi-month negotiation cycle will continue creating uncertainty, with USD/CAD and USD/MXN likely to experience structural premiums."
Tariff Weaponization Impacts Currency Markets Notably, Trump's second term has repeatedly utilized tariff tools: previous impositions of 25% tariffs on Canada and Mexico (later exempted for compliant goods) caused USD/CAD to fluctuate over 100 points in a single day. Although current tariffs received a 90-day extension, Trump has explicitly threatened to reimpose punitive tariffs on Mexico if drug cooperation proves inadequate—with 80% of Mexican exports targeting the US market.
Industrial Restructuring and USD Demand Ohio Republican Senator Bernie Moreno revealed that the administration will strongly push to increase domestic content requirements for automotive and other industries. JPMorgan Asset Management strategist Sylvia Garth analyzes: "If North American supply chain restructuring accelerates, it may boost short-term USD demand related to manufacturing reshoring, but could long-term weaken the dollar's settlement share in international trade."
Technical Warning Signals The Dollar Index currently trades within the critical 98.05-98.29 range. Should negotiations encounter major disagreements, it could break from the current consolidation pattern: upside targets point toward 100.25 (August high), while downside support lies at 97.15 (3.5-year low). Following tonight's non-farm payroll data release, trade policy factors may become the new trading theme.
Markets are closely monitoring subsequent consultations among trade officials from the three North American countries, as any hints regarding rules of origin or tariff adjustments could trigger severe currency market reactions.
As of 14:19 Beijing time, the Dollar Index trades at 98.12.