US refuses to renew USMCA, opening decade-long sunset for North American trade deal
The United States declined to extend the USMCA trade agreement on July 1, triggering a decade-long sunset period that will leave North America’s economic framework in annual review until 2036.
US refuses to extend trade pact
On 1 July, the United States declined to extend the US-Mexico-Canada Agreement (USMCA) during its first joint review, activating a sunset clause that will phase out the deal by July 2036 unless a new agreement is reached. Instead of a 16-year extension, the three nations now operate under annual reviews while negotiations continue. A third round of bilateral talks with Mexico is scheduled for the week of 20 July.
Trump's grievances
The White House has long expressed dissatisfaction with the pact, originally signed during Trump's first term in 2020 to replace NAFTA. In January, Trump called the deal "irrelevant" and said, "I don't know that I'm going to renew it." A senior US official cited chronic trade deficits and uneven market access as key concerns, noting tensions over dairy and other sectors.
- USMCA enters into force, replacing NAFTA.
- First joint review deadline; US declines to extend in current form, activating sunset clause.
- Third round of bilateral US-Mexico negotiations scheduled.
- USMCA set to expire if no new agreement is reached.
Mexico pushes back
Mexico's response mixed alarm with official optimism. The Mexican Automotive Industry Association (AMIA) lamented the decision, and Banamex warned that the uncertainty would continue to limit private investment. However, President Claudia Sheinbaum told reporters it was "not that the treaty ends today, far from it." Economy Secretary Marcelo Ebrard added that if the three sides reach an agreement, the treaty could still be extended by another 16 years.
Iran war mutes the fight
The BBC noted that the ongoing conflict with Iran has absorbed Washington's attention, stripping away much of the political heat expected around USMCA's renewal. With midterm elections approaching and the US needing cooperation from Canada and Mexico on China strategy, the tone remained subdued. Former Mexican ambassador Arturo Sarukhan called the decision "a huge own goal," referencing the three nations' co-hosting of the 2026 World Cup, which is still underway.
Investment and trade at stake
Bloomberg reported that Mexico's pitch to investors, "build here, sell to the US", is now far less certain, threatening an export-led economy already in a slump. The US auto industry could also be a casualty if trade becomes more politically driven. Meanwhile, Commerce data cited by Courrier International showed US exports to Mexico rose 14.9% year-on-year in the first four months of 2026 to $128.6 billion, but the bilateral trade deficit still reached $60.1 billion.
