US declines to extend USMCA trade pact with Canada and Mexico, shifting to annual reviews

The decision

On the day of its first mandatory review, the US told Canada and Mexico it would not extend the US-Mexico-Canada Agreement for another 16-year term. US Trade Representative Jamieson Greer delivered the news during a virtual meeting of the three countries' trade officials.

The United States did not agree to renew the USMCA in its current form. As a result, the USMCA is not renewed.

A senior administration official said Washington "chose not to rubber stamp a USMCA renewal without addressing existing issues" and that the lack of unanimous consent "essentially sets a ten year shot lock to termination". The pact remains in force for now, but the annual review mechanism now applies, opening the door to constant renegotiation of the rules and tariffs that govern roughly $1.9 trillion in yearly North American trade.

From 'best deal' to uncertain future

The USMCA entered into force on July 1, 2020 as the replacement for the 1994 North American Free Trade Agreement. Donald Trump, who pushed for the renegotiation, had called it the "best and most important trade deal ever signed". By January 2026, his tone had shifted.

There's no real advantage to it; it's irrelevant.

He reiterated on June 10 that he did not know if he would renew it, and a week later in Paris said: "I would rather not have the agreement, but I may sign it." The administration's formal no on July 1 makes good on those signals.

Economic stakes

The three economies account for nearly a third of global GDP. Intraregional trade surpassed $1.6 trillion in 2024, up from $1 trillion when the deal took effect, and AP notes the figure now stands at $1.9 trillion, or $5 billion per day. Integrated supply chains mean that parts, agricultural goods and energy products cross borders multiple times before reaching consumers.

Automakers, farmers, retailers and energy firms all depend on the low-tariff framework. The prospect of annual revisions creates uncertainty for investment and pricing. New cars already cost nearly $50,000 on average in the US, and disruptions to the continental auto supply chain could push that number higher.

Reactions across the continent

Mexico's Economy Minister Marcelo Ebrard confirmed the US stance on social media. Canada's Internal Trade Minister Dominic LeBlanc said the three countries "agreed on the importance" of continuing to work together. US business groups such as the Chamber of Commerce had urged extension, warning that manufacturing and agriculture need cross-border certainty. In contrast, the American Iron and Steel Institute and the Steel Manufacturers Association welcomed annual reviews, arguing they give US negotiators more leverage.

There's going to be a lot of drama this summer.

Diego Marroquín Bitar, a researcher at the Center for Strategic and International Studies, offered that forecast at a Cato Institute forum days before the decision. The drama will unfold through the US demands on automotive rules of origin, dairy market access and curbs on third-country exploitation of the deal, particularly by China.

What comes next

The three nations are scheduled to hold a third round of negotiations with Mexico the week of July 20. With the annual review cycle triggered, the pact will be subject to debate every year until it expires in 2036, unless all three countries later agree to a long-term extension. Germany Trade and Invest noted that the US could use the annual mechanism as a lever for political pressure on issues like drug trafficking and energy policy.

The path forward is littered with potential flashpoints. Greer said the US "will continue to engage with Mexico and Canada to address the Agreement's shortcomings and our trade deficits", and the administration has indicated it wants to reach conclusions quickly. Whether that translates into a stable new framework or a decade of brinkmanship is now an open question.