The Trump administration declined to renew the US-Mexico-Canada Agreement (USMCA) following an online meeting on Wednesday, citing trade imbalances and regulatory shortcomings, sparking high uncertainty over the future of the $2 trillion trade across North America.
Background of the USMCA
The pact entered into force in 2020 during US President Donald Trump's first term after he called the previous North American Free Trade Agreement (NAFTA) the worst trade deal and pushed for the new agreement, which includes revisions in labor, digital and intellectual property areas.
US Trade Representative Jamieson Greer, Mexican Economy Minister Marcelo Ebrard and Canadian Trade Minister Dominic LeBlanc held an online meeting on the final day of the joint process. Greer said the US will not agree to renew the agreement in its current form.
Trade Deficits and Economic Impact
The US recorded a $217.5 billion combined trade deficit with its neighbors, including a $190 billion deficit with Mexico alone, in 2025. The USMCA has not been immediately terminated, but Washington's decision initiated an annual review process, forcing critical sections of the deal back into negotiations. The pact will remain active for the next decade before expiring on July 1, 2036, if no revisions are agreed upon.
Greer said in a recent statement that the administration is willing to negotiate and hold a third round of bilateral talks with Mexico during the week of July 20.
Scope and Demands
The agreement represents a common market of more than 515 million people, accounting for around 30% of global gross domestic product. Under the deal, all three member countries were required to send notifications during this process indicating whether they wished to extend it for another 16 years.
The US' total exports to Canada and Mexico reached $817 billion last year, while imports from the two countries totaled $1.034 trillion. The US' total foreign trade volume with Canada and Mexico was $1.8 trillion.
The US is demanding stricter new rules of origin and seeking to raise the domestic content requirement for auto production from 75% to 82%, while also insisting that 50% of all automotive content be sourced from the US to qualify for tariff benefits.
Expert Analysis and Sticking Points
The US' decision is believed to be primarily intended to protect domestic manufacturing jobs and prevent Chinese goods from exploiting Mexico as a backdoor into the American market, experts said. Negotiations remain gridlocked over Canada's protectionist dairy sector, Mexico's energy policies and heavy US tariffs on steel and aluminum.
Mexico wants a 16-year extension, with officials actively preparing contingency plans if talks fail. The country aims to preserve duty-free access while negotiating improvements to the automotive tariff system. Canadian Prime Minister Mark Carney is pursuing a more cautious policy, and while the Canadian side has already offered concessions such as repealing the digital services tax, Carney maintains that he will not sign a detrimental deal.
Business and Political Reactions
The Trump administration continues to use the threat of sweeping tariffs as leverage until industrial production shifts back to the US, but lobbying groups, including the US Chamber of Commerce, are urging Congress to preserve the agreement's trilateral structure, warning that it supports 13 million US jobs and that dismantling it would damage the competitiveness of US firms.
Corporate leaders warned that the new open-ended annual review process could freeze billions of dollars in capital investments because industrial supply chains take decades to establish. Despite these warnings, Washington's refusal to renew the deal signals a fundamental shift toward trade protectionism, threatening to damage the continent's integrated economic architecture.
