Recent reports indicate that a replacement for the North American Free Trade Agreement (NAFTA) is on shaky ground.

In late September, after months of wrangling, the U.S., Canada and Mexico reached a tentative deal just before deadline. Called the United States-Mexico-Canada Agreement (USMCA), trade representatives lauded the agreement as a positive next step for the three countries.

“USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region,” said the US trade representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland, in a joint statement at the time. “It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.”

But in the succeeding months, the path to making USMCA official (the full text is here) has been fraught with obstacles, making passage less and less imminent. Lawmakers in all three countries must ratify it for it to become official.

For one, trade tensions continue: Canada and Mexico have asked that the U.S. lift its tariffs on steel and aluminum imports (25% and 10%, respectively), a holdover from last year that was not addressed in the USMCA. Mexico says they’re currently working on a list of U.S. imports on which they’ll impose tariffs by the end of this month if the metals tariffs are not lifted.

“There’s going to be a bit of everything,” Luz María de la Mora, a Mexican deputy economy minister, told Reuters last week, though she didn’t go into further detail. The original list included bourbon, cheese, motor boats, pork legs, steel and apples. Canada is also considering a list of retaliatory tariffs, and Freeland has said they’re collaborating with Mexico on the issue.

“[T]he persistence of the steel and aluminum tariffs, now nearly six months after heads of state struck the agreement, takes away any sense of urgency [to ratify the USMCA],” wrote global capital market expert Marc Chandler at FXStreet, a digital news outlet for the foreign exchange market. “Canada and Mexico seem content to continue living with NAFTA 1.0 if that is the alternative.”

In addition to an ongoing trade row, political disputes continue. Last week, President Donald Trump pressured Mexico to control its northern border—long a corridor of drug trafficking and immigration into the U.S.—with the threat of tariffs on Mexican automotive exports.

....However, if for any reason Mexico stops apprehending and bringing the illegals back to where they came from, the U.S. will be forced to Tariff at 25% all cars made in Mexico and shipped over the Border to us. If that doesn’t work, which it will, I will close the Border.......

— Donald J. Trump (@realDonaldTrump) April 5, 2019

....This will supersede USMCA. Likewise I am looking at an economic penalty for the 500 Billion Dollars in illegal DRUGS that are shipped and smuggled through Mexico and across our Southern Border. Over 100,00 Americans die each year, sooo many families destroyed!

— Donald J. Trump (@realDonaldTrump) April 5, 2019

At the same time, Democrats in the U.S., who now control the House after mid-term elections in November, have threatened to block ratification of the USMCA unless Mexico improves workers’ rights, a mandate with which the Canadian government is also aligned. USMCA does require Mexico to make changes to its laws when it comes to collective bargaining, which has proven to be a complicated process. However, President Andrés Manuel López Obrador ran on a pro-worker agenda, and in fact a labor reform bill, one that addresses the long-criticized union structure in Mexico, should be approved this month, according to the government. But House Speaker Nancy Pelosi said the U.S. will need to see how labor laws in Mexico are improved before considering ratification of the USMCA.

Trump has expressed frustration at the slow approval process and has threatened to pull out of the old NAFTA without an official ratification of the USMCA, unless Congress acts.

Canada and the U.S. are also feeling the pressure of upcoming elections. Prime Minister Justin Trudeau will run for re-election in October, and Trump in November 2020. Additionally, there are only a few weeks before Canadian lawmakers' summer recess in June, after which they most likely will not return to the NAFTA issue until next year.

“[Trudeau] has his own election campaign to worry about,” wrote the Toronto Globe & Mail Editorial Board this week, “and doesn’t want to appear too cooperative with a U.S. administration that imposed unjustified tariffs on Canadian steel and aluminum as a pressure tactic during the NAFTA negotiations.”

The editorial went on to state that when Trump threatens to close the border with Mexico, “he dampens the Mexican government’s enthusiasm for quick ratification of the USMCA.”

In the Canadian promotional products market, uncertainty continues, particularly when it comes to pricing. “Ratification delays combined with the additional tariffs and the fluctuations of the Canadian dollar will have a dramatic impact on purchasing decisions by Canadian distributors from American suppliers,” Neil Piitz, president of Differenciate Consulting, a Canadian business consultancy for the promo industry, told ASI Canada. “I have several clients that are suggesting to sales teams to buy what they can in Canada at this point to try to avoid diminished margins. This thought process will have a bigger impact on those distributors that are selecting product for program placement with client-mandated price guarantees.”

One Canadian distributor buying more from within Canada is Toronto-based ideavation (asi/229801), which has had to make strategic decisions to mitigate the impact of recent trade uncertainty. For example, the retaliatory tariffs that Canada imposed on U.S. products last year still stand, and the list includes consumer goods that ideavation used to bring in from the U.S., like tablecloths and cocktail napkins.

“We’re not buying a lot of U.S.-made goods now,” managing director Scott Hulbert told ASI Canada this week. “We’ll have an order for an exact repeat of a tablecloth, and now there’s a 10% tariff on it. Combined with the weak Canadian dollar, we’re smacked with additional costs. And our vendors in Canada are small and don't have the same capabilities [as those in the U.S.].”

Hulbert adds that many Canadians feel Canadian and American leadership is making business more difficult, particularly since the U.S. is Canada’s largest trading partner.

“It’s forcing me to limit my vendor base,” he says. “It’s putting us in a position where we can’t buy cross-border if a supplier doesn’t have an FOB Canada program. There’s just so much uncertainty, order-to-order, quote-to-quote, as to what the cost might be. The end-users bear the brunt of the cost, and it’s a real issue for business growth.”

But among all the uncertainty and frustration, Hulbert does see opportunity: product manufacturing may come back in some capacity to Canada, as companies are forced to do less business with U.S. companies, and he’s also seeing distributors team up to overcome border challenges when possible.

“U.S. and Canadian distributors are looking to partner to fill orders,” he says. “I think we’ll see more collaboration between small- and medium-sized businesses in particular, which means more transparency and coming together so the border is less of an impediment.”