A brief statement of barely 150 words was enough for the United States to announce that it will not renew the USMCA — the landmark trade agreement with Mexico and Canada — “in its current form.”

“However, the Agreement remains in force pending resolution of these issues or until the Agreement’s termination,” the Office of the United States Trade Representative (USTR) clarified.

Washington says it would prefer to conduct annual reviews of the pact, a strategy that threatens to unsettle markets by introducing uncertainty for businesses operating on both sides of the border. The White House’s proposed solution for companies seeking to eliminate that uncertainty is to invest in the United States — an approach seen as an exercise in economic nationalism.

“The United States will continue to engage with Mexico and Canada to address the Agreement’s shortcomings and our trade deficits with these countries,” the department headed by Jamieson Greer said in the statement. “As previously announced, the United States will meet with Mexico during the week of July 20 for a third round of bilateral negotiations related to the joint review of the USMCA.”

The news broke on Wednesday, July 1, as the deadline for the USMCA review expired. The three countries’ trade representatives — Jamieson Greer for the United States, Mexico’s Economy Minister Marcelo Ebrard, and Canada’s Dominic LeBlanc — held a virtual meeting to discuss the implementation of the agreement, the extension of the review period and the next steps for the pact.

Following the announcement by Greer, who has gained influence within Trump’s inner circle, optimism in Mexico began to fade. Speaking shortly after the videoconference, Ebrard said Mexico still had room to preserve the North American trade relationship.

“The United States is not in a position to extend the agreement for another 16 years. We are going to move forward under the annual-review track for the next 10 years, which is the remaining term of the agreement.”

“We are not in a hurry, but neither do we want uncertainty, and that is why we need to reach agreement on a number of issues,” the Mexican official said in a short video posted on social media.

Ebrard argued that the annual reviews would allow the three partners to address outstanding disputes and concerns on an ongoing basis. “The United States believes it has lost jobs, particularly in some manufacturing sectors, and the issue of the trade deficit remains pending,” he acknowledged, citing some of the key issues in negotiations with the Trump administration.

Before the call, Mexican President Claudia Sheinbaum stressed that the USMCA remains highly beneficial to the United States.

“The agreement benefits the United States because it helps lower the price of goods,” she said during her morning press conference.

Sheinbaum also highlighted the importance of regional unity and the strength of North America as an economic bloc in relation to global competitors.

“As North America, the three countries together can compete more effectively against other regions of the world,” she added.

Tariffs changed the relationship

A senior Commerce Department official explained that trade relations between the United States and the rest of the world shifted last year when Donald Trump decided to impose unilateral tariffs.

“Our trade deficit with Canada has fallen by roughly a quarter over the past year and a half. Trade with Mexico has increased significantly because of the impact of our tariffs on the rest of the world, with many supply chains returning to the United States,” the official said.

“To some extent, the agreement is subordinate to the president’s robust trade policy,” U.S. officials added.

While trilateral negotiations continue, the trade agreement will remain in force for another decade unless the United States or one of the other signatories decides to withdraw. Instead of scheduled reviews every six years, the pact will now be reviewed annually, opening the door to potentially contentious negotiations every year and creating uncertainty for supply chains across North America.

The automotive industry is watching developments closely, as it is among the sectors most exposed to the agreement, with manufacturing and assembly plants spread across all three countries.

The senior U.S. official also highlighted the differing nature of Washington’s negotiations with Mexico and Canada. While talks with Claudia Sheinbaum’s government are progressing smoothly, U.S. authorities say they have encountered greater obstacles with Canada.

“Mexico has been very constructive throughout this process. It has put forward proposals to reduce the trade deficit, so we have been engaged in formal bilateral negotiations with Mexico to address and resolve a number of bilateral issues,” the official said, suggesting that discussions may increasingly be conducted on a bilateral basis with both its northern and southern neighbors.

Bilateral relations

“Canada is in a different position. Along with China, it was one of the few countries in the world to retaliate against the United States following the president’s landmark trade measures aimed at reducing the U.S. trade deficit and bringing manufacturing back home. Nor has it addressed many of the non-tariff barriers and trade challenges that have persisted in recent years,” the senior U.S. official with knowledge of the negotiations.

Canada’s representative, Dominic LeBlanc, offered his assessment of the meeting in a statement: “We agreed on the importance of continuing our discussions and identifying ways to ensure trade and investment frameworks between Canada, the United States and Mexico continue to support North American prosperity and competitiveness. For Canada, this includes substantive discussions with the United States on addressing sectoral tariffs on Canadian steel, aluminum, autos and lumber.”

LeBlanc said Canada remained “in a position of strength” to preserve and strengthen the USMCA. “At a time of global economic uncertainty, Canada is a stable, reliable and trusted partner. We have the energy and natural resources the world needs, a world-class workforce, and a predictable business environment attracting the highest investment in decades,” he said in the statement.

In force since 2020

The United States-Mexico-Canada Agreement was signed during Donald Trump’s first term and entered into force in 2020, but it included a review clause beginning on July 1 this year. At the time, Trump described it as “the best agreement we’ve ever made.”

The agreement has a 16-year lifespan, running until 2036, although any of the three countries can withdraw with three months’ notice. The USMCA governs nearly $2 trillion in annual trade among the three partners and replaced the North American Free Trade Agreement (NAFTA), which had been in force since the 1990s.

Since the three North American countries signed their first trade pact, their economic ties have deepened significantly, creating highly integrated supply chains in sectors such as automotive manufacturing and many others across the continent. The millions of jobs tied to that integration would be difficult to disentangle.

Even so, Washington has not ruled out formally withdrawing from the agreement, a move that would require six months’ notice.

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