Trump Administration Decides Against Renewing USMCA, Opts for Annual Review Process

On July 1, the United States formally declined to renew the U.S.-Mexico-Canada Agreement (USMCA), triggering an annual review process that extends negotiations for up to a decade. Following a virtual meeting between the three countries, U.S. Trade Representative (USTR) Jamieson Greer confirmed that the United States decided against renewing the agreement “in its current form,” stating that the Trump administration was not prepared to “rubber stamp” the agreement as is due to “substantial issues” with the original agreement. The North American trade pact will remain in force for the next decade before expiring in July 2036, unless the three trade partners reach an agreement during the annual review processes.

Major Changes

For businesses operating across North American supply chains, today’s announcement does not alter day-to-day trade operations. The following distinctions are important:

What has not changed:

• USMCA remains fully in force through July 2036.
• Current preferential tariff treatment remains available.
• Existing automotive, agricultural and manufacturing trade flows continue under current rules.
• Companies do not need to modify customs filing practices today.

What has changed:

• Annual renewal negotiations will now occur, introducing year-over-year policy uncertainty.
• Future rules of origin are likely to become more restrictive.
• North American sourcing requirements are expected to increase, particularly in autos and metals.
• New sector-specific trade disputes could emerge as negotiations develop.
• The administration has signaled a possible two-track bilateral approach with Canada and Mexico separately, which could produce diverging rules across the region.

Key Dates

• July 1, 2026: United States formally declines automatic USMCA extension; annual review process begins.
• July 20, 2026: Third round of U.S.-Mexico bilateral negotiations, Mexico City.
• 2027–2036: Annual review periods; any of the three parties may agree to renew at any point during this window.
• July 2036: USMCA expires absent a renewal agreement.

Background

The USMCA trade agreement was the flagship trade accomplishment of the first Trump administration, meant to replace what President Trump argued was an outdated and ineffective North American Free Trade Agreement (NAFTA). Under the agreement, goods from Mexico and Canada enjoy exemption from a series of tariff and non-tariff-related trade barriers, provided they meet certain rules of origin and content thresholds. USMCA includes a Joint Review provision, a novel concept for trade agreements with little precedent, which requires each side to review the efficacy of the agreement on the sixth anniversary of its initiation, July 1, 2026. As part of this review, all three countries must confirm they wish to extend the agreement beyond its 16-year sunset. If all three countries agree, USMCA would be automatically renewed for another 16 years. Should one or more countries decline, the agreement will automatically expire in July 2036. The three countries would then meet annually to negotiate the USMCA’s renewal and could agree at any time to renew the trade deal prior to termination.

State of Play

President Trump and senior trade officials such as Commerce Secretary Howard Lutnick and Senior Counselor for Trade Peter Navarro have repeatedly expressed dissatisfaction with the current iteration of USMCA, citing concerns with the transshipment of Chinese goods through Mexico to evade U.S. tariffs and lack of growth in American automotive manufacturing. On July 1, USTR Greer held a virtual meeting with Mexican Economy Minister Marcelo Ebrard and Canadian Trade Minister Dominic LeBlanc to formally notify both countries that the United States would not renew the trade pact. Although the administration formally launched the USMCA bilateral review process with Mexico in late May, formal negotiations with Canada have yet to materialize. As of July 1, Trump administration officials have indicated that President Trump will instead pursue separate 10-year trade deals with Canada and Mexico, a structure that both Canada and Mexico have publicly rejected.

Mexico

The United States and Mexico initiated USMCA Joint Review talks in late May, holding a first round from May 28‒29, a second round from June 15‒17 in Washington, D.C., and a third round slated for the week of July 20 in Mexico City. Talks have focused on automotive rules of origin, steel and aluminum manufacturing, and economic security against China. The second round addressed high-priority agricultural issues, including U.S. seasonal producers’ push for tariff-rate quotas to protect domestic harvests. Mexico has drawn a public red line on seasonal restrictions, with Economic Minister Marcelo Ebrard stating that Mexico would not accept changes of that nature and would seek alternative suppliers for U.S. agricultural imports if the administration presses that demand. Both sides also discussed trade remedy cases, including new duties on Mexican tomatoes and an active investigation into strawberries, and agreed to establish a committee to review USMCA Chapter 12 to enhance regulatory compatibility.

Canada

The Trump administration has not yet launched a formal Joint Review process with Canada. USTR officials have publicly criticized Canada’s engagement, with Deputy USTR Rick Switzer accusing Prime Minister Mark Carney of “political malpractice” during trade talks. USTR Greer noted that talks with Canada have been “more challenging” due to a persistent lack of effort to address long-standing U.S. trade concerns. Despite the absence of a formal review process, both sides continue to engage informally, with Canadian Minister for U.S. Trade Dominic LeBlanc holding “substantive” and “detailed” talks with U.S. counterparts in early June.

Implications

Although expected, the Trump administration’s decision against renewing USMCA formalizes heightened uncertainty for businesses operating across North American supply chains. The current agreement remains in force until July 2036, meaning tariff exemptions, rules of origin and dispute settlement mechanisms will continue. However, the prospect of annual reviews, combined with repeated signals from the Trump administration toward a separate, two-track approach with Canada and Mexico, means businesses will face shifting compliance demands and greater sector-specific disruptions.

Throughout formal negotiations and informal discussions, the Trump administration has pushed for stronger rules of origin and content thresholds for goods to receive preferential treatment. In talks with Mexico, USTR has pushed to raise the North American content threshold for automotives from 75% to 82%, where 50% of that value must originate from the United States. The proposal did not include a provision for counting Canadian parts toward the overall North American content threshold. The administration also seeks to raise the regional value content (RVC) requirement for heavy trucks from 70% to 75% and reimpose a stricter RVC calculation method for high-value components. The administration is also expected to seek an increase to the existing 40% high-wage content requirement covering core components such as engines, transmissions and electric vehicle (EV) batteries.

Sectoral Impacts

Automotive: Proposed increases to regional and U.S.-specific content requirements would complicate deeply integrated cross-border supply chains. After decades of offshoring, key components such as wiring harnesses are not available domestically at scale, making near-term compliance with the proposed thresholds extremely difficult. Manufacturers should begin mapping exposure to non-North American inputs now.

Metals and Manufacturing: Greater scrutiny of steel and aluminum sourcing is expected, with tighter requirements designed to prevent Chinese-origin material from satisfying North American content rules. Businesses should anticipate expanded content-tracking and customs documentation obligations.

Agriculture: Continued pressure for seasonal tariff-rate quotas and enhanced trade remedy protections for U.S. domestic producers. Mexico’s public red line on seasonal restrictions introduces escalation risk for agricultural trade flows that exporters of produce, dairy and livestock should monitor closely.

Consumer Products and Retail: Higher compliance costs if sourcing rules tighten, with particular exposure for products incorporating Chinese-origin inputs. Companies may need to evaluate restructuring procurement strategies.

Canadian Sourcing

The absence of a formal U.S.-Canada negotiating process raises a risk distinct from the Mexico track: negotiations could proceed on diverging timelines, producing rules that differ between the two bilateral agreements. Companies that currently treat North America as a single integrated production platform should recognize that future compliance requirements affecting Canadian inputs may not align with those negotiated with Mexico, adding a new layer of complexity to cross-border supply chain management. The Trump administration’s exclusion of Canadian parts content from its automotive proposals is an early and concrete signal of this divergence risk.

Investment Planning

For companies considering major investments in North American manufacturing, the launch of annual reviews introduces meaningful uncertainty regarding future market access conditions. As Minister Ebrard warned last week, a constant review process risks choking off the very investment needed to strengthen North American supply chains and reduce dependence on Asian suppliers. Businesses making capital allocation decisions on 5- to 15-year horizons should assess projects against multiple scenarios:

1. A status quo in which USMCA protections remain broadly intact; or
2. A renegotiated agreement with stricter content requirements; or
3. Separate bilateral arrangements that produce diverging rules across the region.

Next Steps

Brownstein stands ready to assist impacted industry stakeholders in navigating ongoing negotiations between the Trump administration, Mexico and Canada and in planning for annual Joint Review periods. Companies relying on USMCA preferences should consider the following near-term actions:

• Conduct a rules-of-origin exposure assessment to identify vulnerabilities under proposed new thresholds;
• Map supply chains to identify non-North American content, particularly Chinese-origin inputs;
• Review customs and compliance systems for expanded traceability requirements likely under any revised agreement;
• Evaluate contingency sourcing strategies against multiple regulatory scenarios;
• Monitor negotiating developments closely, particularly the July 20 U.S.-Mexico round and any announcement of formal U.S.-Canada talks; and
• Engage proactively with industry associations, USTR and Congress. With negotiations still in early stages, industry input carries significant weight in shaping outcomes.

For additional insights into the state of USMCA negotiations or assistance in pursuing engagement with the Trump administration on core elements of the trade agreement, please contact a member of the Brownstein team.

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