Story Highlights
- The U.S. will not renew USMCA for another 16-year term, though the agreement remains legally in force until 2036 under annual reviews
- U.S. Trade Representative Jamieson Greer cited persistent trade deficits with Canada and Mexico as the administration’s central concern
- The U.S. and Mexico are scheduled for a third round of bilateral negotiations the week of July 20; formal talks with Canada have not yet begun
What Happened
Wednesday marked the legally mandated deadline under the U.S.-Mexico-Canada Agreement, known as USMCA in the United States and CUSMA in Canada, for the three signatory nations to decide whether to extend the pact for another 16 years, through 2042. Following a virtual meeting between U.S. Trade Representative Jamieson Greer, Canadian minister Dominic LeBlanc, and Mexican economy secretary Marcelo Ebrard, the Trump administration confirmed it would not agree to renewal in the agreement’s current form. “The United States did not agree to renew the USMCA in its current form,” Greer said in a statement. “So, as a result, the USMCA is not renewed.”
The decision does not terminate the agreement. Because it was not renewed, USMCA now enters a mandatory decade-long stretch of annual reviews, remaining legally in effect until its original expiration date of July 1, 2036, unless a member country formally withdraws with six months’ notice or a new agreement is separately reached. A senior administration official told reporters that Trump’s primary objection centers on persistent U.S. trade deficits with both neighbors, which the administration says the deal has failed to meaningfully address. According to the Trade Representative’s office, the U.S. trade deficit with Mexico stood at nearly $197 billion in 2025, while the gap with Canada exceeded $46 billion.
Trump originally negotiated and signed USMCA during his first term, replacing the 26-year-old North American Free Trade Agreement, and once called it “the fairest, most balanced, and beneficial trade agreement we have ever signed into law.” His tone has shifted considerably since returning to office. “I don’t know that I’m going to renew it,” Trump said in June. “We don’t need anything that Canada has. We don’t need anything that Mexico has, but they need everything that we have.” Over the past year, Trump imposed a series of tariffs on both countries, including duties on steel, aluminum, automobiles, and softwood lumber, moves that administration officials say have already reshaped the trading relationship regardless of what happens to USMCA itself.
The administration’s approach toward its two neighbors has notably diverged. A senior official described Mexico as broadly “constructive” in addressing the administration’s tariff concerns, with bilateral talks already underway and a third round scheduled for the week of July 20 covering rules of origin, intellectual property, and labor compliance. Canada, by contrast, has not yet begun formal bilateral negotiations and was described by the same official as having failed to address “non-tariff barriers and trade challenges” the U.S. has raised. Canadian officials had pushed for a full 16-year extension before the deadline, arguing the deal has driven significant continental trade growth.
Why It Matters
The USMCA decision matters enormously to American manufacturers, farmers, and consumers who depend on integrated North American supply chains built over more than three decades under NAFTA and its successor. Automakers in particular have structured production networks that cross the U.S., Mexican, and Canadian borders multiple times before a finished vehicle reaches a dealership, and prolonged uncertainty over tariff exemptions and rules of origin threatens to raise costs or force companies to reconsider where they locate factories and suppliers.
For Canada, the stakes are especially high. The USMCA currently exempts nearly 90 percent of Canadian exports to the U.S. from tariffs Trump has imposed since returning to office, meaning any erosion of the agreement’s protections could expose a much larger share of Canadian goods, particularly steel, aluminum, autos, and softwood lumber, to punitive duties. That vulnerability gives Washington considerable leverage in the coming negotiations, but it also risks souring one of America’s closest and longest-standing alliances at a moment when both countries face shared economic pressures.
For American workers and businesses, the annual review process introduces a new layer of continuous uncertainty that did not previously exist. Rather than operating under a stable long-term agreement, companies with cross-border operations will now need to plan around the possibility of significant rule changes every single year for up to a decade, complicating long-term investment decisions in manufacturing, agriculture, and logistics.
Economic and Global Context
Trade between the U.S., Canada, and Mexico has grown by roughly 37 percent since CUSMA took effect in 2020, now exceeding $1.9 trillion annually, making it one of the largest integrated trading relationships in the world. Any disruption to that framework carries macroeconomic consequences well beyond the three countries involved, given how deeply North American supply chains are woven into global manufacturing, particularly in automotive, agricultural, and energy sectors.
Economists at investment advisory firm Capital Economics have warned that, absent new bilateral agreements to replace lost tariff exemptions, growth would likely slow in both Canada and Mexico, since existing exemptions from Trump-era tariffs have been a key prop for both economies’ external sectors over the past year. A full U.S. withdrawal from USMCA, while not the administration’s stated near-term plan, remains a possibility Trump has reserved the right to pursue, according to officials.
Globally, the outcome will be closely watched by other trading partners negotiating with the Trump administration, as it signals Washington’s broader willingness to abandon or restructure long-standing multilateral trade frameworks in favor of bilateral deals it views as more advantageous. This approach mirrors tactics the administration has used elsewhere, prioritizing deficit reduction and leverage-based negotiation over preserving established multilateral trade architecture.
Implications
In the immediate term, all eyes turn to the scheduled U.S.-Mexico talks beginning the week of July 20, which will address rules of origin, intellectual property protections, and Mexico’s compliance with labor obligations under the pact. Canada’s path forward remains less clear, with no formal negotiation date announced and rhetoric from both sides suggesting a more contentious road ahead.
Businesses operating across the three countries should prepare for a prolonged period of regulatory and tariff uncertainty, potentially lasting years, as the annual review process unfolds. Companies with significant cross-border manufacturing exposure, particularly in the automotive and agricultural sectors, may need to reassess supply chain resilience and consider contingency plans should tariff exemptions narrow.
For policymakers and voters, the decision will likely become a touchstone in debates over Trump’s broader trade strategy heading into the midterms, testing whether his approach delivers on promises to shrink trade deficits without triggering broader economic disruption for American businesses and consumers who have benefited from three decades of North American trade integration.
Sources
“U.S. won’t renew USMCA, will review trade pact with Canada and Mexico”
