Charlie Smith, managing director of geopolitical strategy at Newmark Global Strategy filled in as guest editor of Area Development for Q1. He sat down with fellow experts in site selection, foreign direct investment, incentives and economic development from Newmark Global Strategy to discuss the current trade tensions across North America and their implications. Below is an edited excerpt of his discussion with managing director Carlos Sanchez (based in Mexico) and senior managing director Gregg Wassmansdorf (based in Canada).

Charlie Smith: Gregg, let’s start with you. How would you sum up the economic and trade climate in Canada right now?

Gregg Wassmansdorf: There’s significant disappointment that the U.S. is treating Canada—its closest ally and trading partner—almost as an adversary. The administration’s 25 percent tariff proposal is viewed as an existential threat. Foreign Affairs Minister Mélanie Joly recently stated at the Munich Security Conference that if the U.S. is coming for Canada, other nations should take note. There’s concern this is about more than just trade—it’s a geopolitical shift that undermines Canadian sovereignty. Canadian companies are reacting by reconsidering their supply chains and looking at alternative markets.

Charlie Smith: Carlos, what’s the perspective from Mexico?

Carlos Sanchez: It’s similar. There’s massive uncertainty, given that 80 percent of Mexico’s exports go to the U.S. This has triggered a nationalistic response, which could be problematic. Our president remains extremely popular and has overwhelming legislative power. If the U.S. escalates tariffs, Mexico could retaliate, which would disrupt business on both sides of the border. The bigger issue is trust—if the U.S. is no longer a stable trade partner, companies will seek alternatives. Some Mexican leaders are also pushing for stronger ties with Europe and Asia to offset this volatility.

Charlie Smith: Gregg, what are the biggest risks for Canadian businesses?

Gregg Wassmansdorf: The biggest risk is recession. A 25 percent tariff could shrink Canada’s GDP by 6 percent, according to the Bank of Canada. We’re already seeing companies freeze investments. Retaliatory tariffs will also raise costs for U.S. consumers—from aluminum cans to housing materials. Another major concern is that Canadian firms are losing confidence in the stability of North American trade, and some may look to shift operations elsewhere.

Charlie Smith: Carlos, what are the risks for Mexico?

Carlos Sanchez: The biggest immediate risk is supply chain disruption. The auto industry, which relies on cross-border production, would be severely affected. Auto parts cross the U.S.-Mexico border multiple times before final assembly, meaning a 25 percent tariff compounds costs at every crossing. Agribusiness is also vulnerable—much of the fresh produce in U.S. grocery stores comes from Mexico. If that trade is disrupted, supply chains will be in disarray. Additionally, there’s concern about a broader economic slowdown, as manufacturers may delay expansion or relocate operations outside North America.

Charlie Smith: Are there any opportunities amid these challenges?

Gregg Wassmansdorf: Canada can address U.S. concerns in ways that also benefit us—like increasing military spending and improving border security. Beyond that, we’re working to reduce reliance on the U.S. We have a free trade agreement with the EU that the U.S. does not, and we’re strengthening trade ties with Mexico. The current situation may accelerate Canada’s efforts to diversify its economy and invest in new technologies that reduce dependency on a single trading partner.

Charlie Smith: Carlos, is Mexico diversifying as well?

Carlos Sanchez: Absolutely. Mexico has started strengthening ties with the EU and Latin America. If North America pulls apart, other markets will step in. Southeast Asian countries, for example, have already gained market share from China in the U.S. If the U.S. and Mexico disengage, those countries will be the biggest winners. Some of our largest industrial parks are already seeing interest from firms looking to shift exports beyond the U.S.

Charlie Smith: How does this impact the upcoming USMCA renegotiations in 2026?

Gregg Wassmansdorf: It’s uncertain. The U.S. could even withdraw entirely, shifting to bilateral agreements and a tariff-based trade model. That would be disruptive, especially for industries like automotive, aluminum, and steel. The current trade dispute resolution mechanism is also at risk, which would make it harder for smaller countries to challenge unfair trade practices. Some Canadian policymakers fear that weakening USMCA could lead to a broader unraveling of North American economic cooperation.

Carlos Sanchez: From Mexico’s perspective, the U.S. has already undermined the credibility of USMCA. Businesses need stability, but with a six-year sunset clause in the agreement, long-term planning becomes difficult. If tariffs are used as leverage in negotiations, Mexico and Canada may pivot more aggressively toward Europe and Asia. There’s also concern that rolling back USMCA could weaken Mexico’s role as a key player in North American manufacturing.

Charlie Smith: What should we be watching for in the months ahead?

Gregg Wassmansdorf: The administration has indicated it will move beyond tariffs to non-monetary trade barriers—like labeling environmental regulations or food safety standards as unfair trade practices. That could lead to further economic fragmentation. If supply chains become too costly, companies will rethink their North American footprint. We also need to watch how Canada positions itself in global trade discussions as tensions with the U.S. continue to rise.

Carlos Sanchez: The big question is how isolated the U.S. wants to become. If it moves away from North American trade, countries like Canada and Mexico will double down on new partnerships. The unintended consequence could be a weaker North American bloc overall. If Mexico sees continued volatility in U.S. trade policy, it will likely accelerate efforts to develop stronger economic ties with the EU and Asia. In the short term, many firms will be looking for contingency plans to minimize their exposure to uncertainty.

Charlie Smith: This is an evolving situation, and it will take time to see the full impact. Thanks to you both for sharing your insights.

Charlie Smith joined Newmark in 2022 as a Managing Director within the Geopolitical Strategy consulting specialty practice, part of Newmark Global Corporate Services.
A specialist in geopolitical shifts and their global impact, Smith provides clients with advisory services on how to assess and manage dynamic contexts. He works with organizations of varying sizes and geographic locations, including established global agencies and firms considering new markets, analyzing international locations and U.S. geographies. Smith works with businesses to understand their strategic needs and anticipated challenges as they relate to political, economic, and local market changes.

Carlos Sánchez serves as Director for Incentives in the firm’s Economic Development Advisory practice within Newmark’s Global Corporate Services’ (GCS) Global Strategy and Consulting division. Sánchez assists corporate clients in their expansion and site selection processes to apply for support programs that can benefit their operations. Based in Newmark’s Mexico City office, Sánchez has extensive experience in the promotion and implementation of foreign direct investment (FDI) projects in Mexico.

Gregg Wassmansdorf is a Market Leader for Newmark’s Global Corporate Services (GCS) division in Canada, where he shares responsibility for platform development, sales, engagement management, and client service delivery for the company’s consulting practice.