The Office of the United States Trade Representative has announced that a critical trade agreement with Mexico and Canada will not be renewed.
The deadline was July 1 for the three nations to choose whether to prolong the United States-Mexico-Canada Agreement (USMCA) through 2042. With the Trump administration opting not to extend, the USMCA will now remain active but under annual assessments until 2036, at which point it will expire unless a new extension agreement is made.
Jamieson Greer, the U.S. Trade Representative, stated, “The United States will continue discussions with Mexico and Canada to address the agreement’s weaknesses and our trade imbalances with these nations. However, the agreement will stay in effect until these concerns are resolved or until its eventual termination.”
Focus on the U.S. trade deficit
President Trump formally enacted the USMCA in 2020, superseding the former 1994 North American Free Trade Agreement.
The USMCA was designed to diminish trade barriers between the U.S., Canada, and Mexico, with the goal of generating American jobs and boosting the manufacturing sector. Among its provisions, the deal imposed stricter regulations on the automotive sector, mandating that 75% of vehicle components be manufactured within North America to bypass import duties.
At an event in Michigan in 2020, Mr. Trump described the pact as the “fairest, most balanced and beneficial trade agreement we have ever signed into law.” But he has since soured on the deal. Speaking to reporters in June, Mr. Trump said the U.S. would “do better as a country” without the agreement.
The USMCA has failed to ease the U.S. trade deficit with Canada and Mexico, a senior Trump administration official told reporters. “We believe that the USMCA does not operate to control the deficit like the president intended,” the person said.
According to the Trade Representative’s office, the U.S. trade deficit with Mexico was nearly $197 billion in 2025, while the trade gap with Canada was over $46 billion.
U.S. officials are scheduled to meet with Mexico represenatatives the week of July 20 for another round of bilateral negotiations. During those talks, the two countries will discuss rules of origin, intellectual property and concerns surrounding Mexico’s compliance with labor obligations, the senior administration official said.
The official did not discuss specific plans to meet with Canada, but said, “We will continue our discussions with our Canadian partners.”
Talks could take years
The Trump administration could decide to withdraw from the USMCA altogether before it expires in 10 years, though that decision will likely depend on how negotiations unfold. Those talks could drag on for years, according to trade experts.
The senior administration official expressed interest in resolving the major sticking points of the trade deal quickly, adding that Mr. Trump could reach an agreement with Mexico and Canada to alter their trade pact before his term expires in 2028.
“The president remains skeptical of this, but I think it’s in the interest of our country to keep negotiating,” the person added.
The impact of a U.S. withdrawal from the USMCA would depend on whether any bilateral trade agreements replaced the pact, according to trade experts.
“Absent bilateral deals, growth would slow in both Canada and Mexico as the tariff exemption, which has kept both countries’ external sectors afloat over the past year, was removed,” economists with investment advisory firm Capital Economics said in a report.
“But given the average tariff rate would only rise to 10%, rather than the much higher rates previously threatened under IEEPA, recessions could be avoided,” they added, referring to the International Emergency Economic Powers Act.
Alain Sherter