Asia's Perspective on the Renewal of the USMCA: How Is the North American Economic Bloc Reshaping Global Supply Chains?

The Asian Dimension of the USMCA Renewal

While Washington policy think tanks turn their attention to trade rules on the North American continent, Asia’s business community may still be immersed in piecemeal adjustments to the China-ASEAN supply chain. However, in formal comments submitted to the Office of the U.S. Trade Representative (USTR), the Information Technology and Innovation Foundation (ITIF) put forward an ambitious vision capable of reshaping the global manufacturing landscape: renewing the U.S.-Mexico-Canada Agreement (USMCA) and upgrading it into a “Factory North America”—a regional production system that complements U.S. capabilities and can effectively hedge against the influence of Chinese manufacturing.

On the surface, this proposal focuses on the Western Hemisphere, but its hidden impact on Asian supply chains and the regional economic order may go far beyond what the words literally suggest.

North American Bloc Formation: From Offshoring to Nearshore Integration

ITIF’s core logic is that if the United States wants to compete with China in advanced manufacturing, going it alone is no longer enough. China’s share of global GDP exceeded 17% in 2020 (a figure cited by ITIF), while the relative U.S. share has continued to decline. But if the United States, Mexico, and Canada are treated as a whole, the gap between their combined global output share and China’s can be narrowed considerably—in some strategic industries, to less than one percentage point. This is precisely the starting point of the “North American economic bloc” strategy: leveraging Mexico’s low-cost manufacturing and Canada’s resources and innovation to build a “continental factory” with a tighter internal cycle.

For Asia, the exclusivity of this strategy cannot be ignored. ITIF emphasizes that 40% of the inputs in Mexican manufactured goods come from the United States, whereas for China the figure is only 4%. This means that when manufacturing capacity shifts to Mexico, the United States retains a higher share of industrial-chain value; when it shifts to Asia, the United States cedes more segments. Therefore, U.S. support for “nearshoring” necessarily comes at the expense of weakening “offshoring,” especially the “China+1” model. Asian countries—particularly ASEAN members that rely on exports to the United States—need to re-examine whether the “Asian factory,” built over the past decades on a Trans-Pacific division of labor, is being squeezed by the foundations of the “North American factory.”

From “China+1” to “China+N”? Rule Changes Are Key

ITIF recommends that the renewed USMCA substantially strengthen its rules, including stricter rules of origin, more unified investment screening, excluding large-scale intellectual property infringers from the North American economy, and updating the digital trade chapter to include e-payments, hardware export controls, and other provisions. Once these rules take shape, they are likely to become a template for future bilateral and multilateral trade negotiations—especially in terms of exporting rules to Asia.For example, the "interoperability and open data" advocacy in digital trade provisions is less about serving the free market than about clearing obstacles for U.S. tech companies' global expansion. Meanwhile, provisions on "preventing digital barriers" and protecting intellectual property may be used to restrict the industrial catch-up path of some Asian countries through "data localization" and "forced technology transfer."

More notably, ITIF explicitly recommends that the United States expand USMCA membership to include Chile, Colombia, Panama, Peru, and Central American countries. This implies that an "exclusive production network" centered on the United States is taking shape in the Americas. If Asian countries rely only on RCEP or CPTPP frameworks while ignoring the linkage of the United States in rules, technology, and market access, they will face more complex trade diversion and investment diversion.

The Dual Challenge for Asia: Both Competitor and Rule-Taker

Asian economies face a dual challenge in the USMCA renewal. On one hand, from the perspective of industrial competition, "Factory North America" will enhance U.S. nearshoring capacity in automobiles, electronics, medical devices, and other fields, directly competing with Asia's export-oriented economies for orders and investment. For example, Mexico's manufacturing output as a share of GDP continues to rise, while the pressure on China's manufacturing relocation has not dissipated. On the other hand, from the rule-making dimension, Washington is attempting to use upgraded USMCA provisions to set coordinates for the future of global trade—if Asian countries do not participate in setting standards, they may be forced to choose between "compliance costs" and "market access."

However, Asia also has its own buffer. The ITIF report acknowledges that North America lags behind China in 7 of 10 strategic industries, and China maintains advantages in IT and information services, pharmaceuticals, and other fields. More importantly, Asian regional integration has already accumulated deep supply chain linkages: the intensity of intermediate goods trade among Japan, South Korea, ASEAN, and China is far higher than similar indicators in the Americas. Therefore, the USMCA renewal will not immediately upend Asia, but it will accelerate a long-term trend: the global manufacturing shift from "efficiency first" to "security first," and competition between regional blocs will replace competition between individual countries.

Conclusion: Asia Needs Its Own "North American Perspective"

The value of this ITIF document lies not only in its recommendations for U.S. trade policy, but also in its demonstration of a high degree of "regional bloc thinking." It treats Mexico and Canada as extensions of the U.S. industrial chain and views North America as a unified economic space to face external challenges. This kind of thinking is precisely what Asia lacks.

Asian economies are accustomed to viewing trade agreements from a country-by-country perspective, but if they are to face a real "Factory North America," they need a more ambitious and more unified integration plan. Whether it is deepening RCEP, promoting a China-Japan-South Korea free trade agreement, or forming deeper Asian supply chain cooperation mechanisms, the time to accelerate is now. Otherwise, in the coming era of "regional bloc competition," Asia may lose the window for rule-setting.Ultimately, as ITIF has recognized, free trade is not the end but a means to achieve industrial strength. Asia likewise needs to consider: under the broader structure of the U.S.-China rivalry, how to build an "Asian production system" that both safeguards its own interests and drives regional prosperity.