(July 1): The US decided against renewing its trade deal with Canada and Mexico, US Trade Representative Jamieson Greer said, choosing instead to conduct annual reviews of the pact in a move that risks adding uncertainty for companies producing goods across North America.
The US-Mexico-Canada Agreement, or USMCA, will remain in force for another a decade provided no one country decides to exit. Annual reviews instead of a longer-term renewal open the door to years of contentious negotiations over the rules governing continent-wide supply chains and low tariff levels vital for automakers, farmers and energy companies.
Speaking ahead of an official announcement, Greer said the Trump administration is “not prepared to rubber stamp the agreement.”
“We think there are substantial issues,” Greer said in an interview with Bloomberg News on Wednesday, adding several changes are needed to address imbalances.
While the US decision wasn’t a big surprise, it nonetheless marked a head-spinning reversal for President Donald Trump, who had rammed through the original USMCA in 2020 and once called it the “best and most important trade deal ever made.” Trump soured on the deal in his second term in part because it protects huge sections of trade from tariffs he sought to impose and did little to address trade deficits with Mexico and Canada.
The potential disruptions and the broad economic impact are stark. USMCA boosted economic activity between the three countries, which combined represent nearly a third of the world’s gross domestic product. Intraregional trade surpassed US$1.6 trillion ($2 trillion) in 2024, up from US$1 trillion when the agreement went into place in 2020.
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On Wednesday, the six-year anniversary of USMCA’s inception, the countries could’ve extended the accord, which Trump negotiated during his first term, by 16 years. That scenario was unlikely, however, as Trump made clear he wanted changes or might opt to go it alone — part of a broader push by his administration to reshore manufacturing jobs and squeeze concessions from trading partners.
USMCA has provided a measure of stability in an otherwise turbulent period that included Trump’s tariff clashes with China and other major trading partners. His moves to impose new levies came alongside sweeping exemptions for USMCA-qualified products, easing the blow on Mexico and Canada.
Still, other US duties on products such as autos and metals remain a sore spot in negotiations with Mexico and Canada and will cloud future talks.
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Trump sought to ramp up pressure ahead of the July 1 milestone, claiming that the US would be better off without the deal. That path will be difficult given bipartisan support for USMCA in Congress, even if some lawmakers and labor unions want to see it improved.
Under the annual reviews, the countries can try to reach an agreement during the next 10 years. If no resolution is reached during that span, the pact expires in 2036.
“We have these ongoing negotiations and we don’t know exactly when they will end, and there’s no short- or medium-term forcing function for those negotiations to end,” said Patrick Childress, co-lead for Holland & Knight’s USMCA team. “So that creates, of course, some uncertainty for companies.”
Washington has already engaged in formal talks with Mexico in recent months but has largely shunned Canada at the negotiating table. Trump has clashed with Prime Minister Mark Carney, who has sought to reduce Canada’s trade dependence on the US.
Complicating any negotiations is China’s new assertive trade posture. As Chinese automakers gain market share outside the US, critical USMCA issues include a minimum threshold requirement for American auto parts and a push by Washington to tighten the rules of origin on autos, prompted by concerns over transshipments of Chinese inputs.
Another potential flashpoint is the tolerance for Chinese investment, and the degree to which Mexico and Canada align with the US’s national-security concerns about it.
“Canada is interesting because one day they’ll say, ‘We want to help America reindustrialise. We want to help make America great again,’ Greer told Bloomberg News. “Then the next day they’ll talk about bringing in Chinese investment. So we get mixed messages from Canada.”
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Given the geopolitical backdrop and Trump’s maximum-leverage style, an extended negotiating process could prompt companies to hold off on potential investments. Lobbying groups including the US Chamber of Commerce and the Business Roundtable have pushed for governments to strengthen and retain the agreement.
“Supply chains are built with 30-year visibility, not five, and uncertainty could dissuade investment and growth,” Madeline Chalecki, assistant director of the Atlantic Council’s GeoEconomics Center, wrote in online post this week.
In May, associations representing most of the North American auto market wrote to Greer, urging the administration to strengthen and extend the deal.
In June, the US Chamber of Commerce brought over 70 business partners to Capitol Hill, pressing lawmakers to “support maintaining the framework, press for full compliance from all three governments and encourage an expeditious and orderly review that delivers certainty for businesses.”
Uploaded by Magessan Varatharaja
