By declining a clean extension, Washington has placed the US-Mexico-Canada Agreement (USMCA) on a decade-long path of mandatory annual reviews, potentially leading to a hard expiration on July 1, 2036. Keeping the agreement unsettled could allow Washington to use each annual review to press Canada and Mexico for further concessions, but persistent regulatory uncertainty could also negatively impact investment whether or not US withdrawal occurs.

To envision how this next decade of friction could reshape the North American economy, hfAI Lab prompted three large language models (LLMs) to conduct a structured predictive analysis. By assigning distinct geopolitical and economic frameworks to separate models, the exercise simulates three divergent, plausible futures for the continent through 2036.

Scenario One: Fortress North America (Claude Sonnet 5)

How it unfolds

Washington uses annual review cycles as political leverage, making rules of origin and continued market access increasingly conditional on Canada and Mexico aligning with US trade and economic security priorities. Fearing regulatory instability, companies shift capital away from long-term regional expansion toward short-term risk buffers, setting back the broad US goal of using annual reviews to reduce bilateral trade deficits for the US.

Economic reality

Regional rules of origin tighten sharply. Non-North American autos, technology, battery chemistries, and software face steep tariffs or total exclusions. Final assembly becomes heavily concentrated in the US, pushing Mexican manufacturing into lower-margin sub-assembly and locking Canadian critical minerals into priority contracts for US buyers.

The border in 2036

Intra-bloc trade flows efficiently through automated digital corridors, but the region is surrounded by a high tariff wall and strict origin audits.

Scenario Two: Fragmented Continent (Gemini 3.6)

How it unfolds

Trilateral consensus collapses as repeated reviews fail to produce agreement. North American trade fragments into separate, volatile bilateral relationships managed directly out of Washington, depriving long-term cross-border infrastructure of predictable funding.

Economic reality

Automakers and manufacturers are forced to navigate two conflicting rulebooks, inflating administrative overhead and driving up consumer prices. Seasonal agricultural trade becomes a target for retaliatory tariffs, while new data localization mandates force companies to build costly, redundant information technology infrastructure across all three countries.

The border in 2036

Both the northern and southern US borders operate as high-friction bottlenecks marked by lengthy freight delays, physical cargo inspections, and significant compliance costs.

Scenario Three: Pacific Pivot (GPT-5.5)

How it unfolds

Weary of perpetual political pressure and unwilling to plan around recurring USMCA uncertainty, Canada and Mexico pursue a structural decoupling — accepting lower trade volumes with the US to regain sovereign control over their trade policies.

Economic reality

Both nations slash external import tariffs and relax local content rules for non-US goods, sparking a surge of investment from Asia and Europe. Mexico pivots its agricultural purchasing toward South America, while Canada redirects its critical mineral exports toward European and Asian manufacturing hubs.

The border in 2036

The US remains a vital trading partner, but its share of Canadian and Mexican trade drops significantly as both nations integrate into broader global networks and rely more heavily on trade under World Trade Organization (WTO) terms.

Stress-testing the scenarios: Three critical questions

With three divergent scenarios established, we prompted each LLM to answer deeper questions regarding the future of North American trade.

[Editor’s note: The figures below are model-generated estimates intended to illustrate the possible scale and direction of change rather than serve as independently verified forecasts.]

#1. How might North American production be affected under each scenario?

Scenario One: Fortress North America (Claude Sonnet 5)

Production volume grows modestly but shifts toward US-centric assembly, while costs rise as regional protection replaces global efficiency. The bloc becomes internally unified while cutting itself off from outside supply chains.

Scenario Two: Fragmented Continent (Gemini 3.6)

The fracturing of USMCA's unified framework shrinks regional output and dismantles just-in-time supply chains, replacing continental scale with three higher-cost domestic markets.

Scenario Three: Pacific Pivot (GPT-5.5)

North American production shifts rather than shrinks under this scenario. Canada and Mexico become more globally integrated, while the US becomes more domestically oriented, resulting in modest regional output growth but a more fragmented manufacturing base.

[Editor’s note: Regardless of the change in production volume, all three LLMs’ projections expect consumer costs to rise in each scenario.]

#2. How would foreign direct investment (FDI) flows and capital allocation shift under each scenario?

Scenario One: Fortress North America (Claude Sonnet 5)

FDI shifts from long-horizon, regionally diversified investment toward shorter-term capital concentrated in the US, as firms prioritize tariff protection over cross-border efficiency — leaving Mexico and Canada more dependent on contracts anchored in the US than on independent investment decisions.

Scenario Two: Fragmented Continent (Gemini 3.6)

Unpredictable bilateral rules will discourage long-term FDI across North America, reallocating capital away from cross-border manufacturing networks and toward safe-haven, single-market operations.

Scenario Three: Pacific Pivot (GPT-5.5)

Foreign investment shifts away from a North America-centric model toward a more globally diversified one. Canada and Mexico attract more capital from Asia and Europe as investors use them as export platforms beyond the US, while investment in the US becomes increasingly focused on serving its domestic market.

[Editor’s note: GPT-5.5 stressed that the biggest change would be capital reallocation rather than an overall change in investment.]

#3. How effectively does each scenario screen non-party content without disrupting supply chains?

Scenario One: Fortress North America (Claude Sonnet 5)

Screening is highly effective — automated digital corridors and strict origin audits reliably detect and exclude non-compliant inputs, especially foreign battery chemistries and software, making it difficult to circumvent restrictions on non-North American inputs.

But this comes at a real cost to flexibility: strict rules of origin thresholds and heavy audit scrutiny slow sourcing decisions, raise compliance overhead, and squeeze out legitimate mixed-origin components that do not cleanly qualify. Once compliance is established, intra-bloc trade flows smoothly, but the need to prove origin up front and the risk of audit delays burden smaller suppliers and just-in-time manufacturers, reducing flexibility in exchange for greater regulatory certainty.

Scenario Two: Fragmented Continent (Gemini 3.6)

Screening non-party content is highly ineffective. Heavy-handed bilateral audits, conflicting rules, and mandatory physical inspections severely disrupt cross-border supply chains without enhancing security.

Instead of precision tracking, aggressive customs hurdles penalize legitimate North American production and slow logistics. Meanwhile, disjointed enforcement across separate borders creates regulatory loopholes, allowing non-party inputs to easily bypass restrictions through the weakest link and triggering additional trade barriers.

Scenario Three: Pacific Pivot (GPT-5.5)

North America becomes less effective at screening non-party content because the unified USMCA rules of origin give way to more diverse sourcing and greater reliance on trade under WTO terms.

Canada and Mexico deliberately relax local content requirements and expand imports from Asia and Europe, increasing the share of non-North American inputs in regional production. While this improves sourcing flexibility and reduces dependence on US suppliers, it also makes supply chains more difficult to monitor under a common framework, resulting in weaker regional screening but fewer disruptions to firms seeking the lowest-cost global inputs.

[Editor’s note: This experiment sets out the expected policy trade-offs:

Fortress North America gains security at the expense of agility
Fragmented Continent creates disruption without greater security
Pacific Pivot relaxes Canada and Mexico’s screening of local content requirements, giving up the positive externalities from greater rules of origin visibility into trade and investment among Canada and Mexico with Asia and Europe in favor of lower-cost global sourcing.]

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