The United States announced it would not renew the trilateral trade agreement covering $1.6 trillion in trade between the United States, Mexico and Canada, a day before the first joint enforcement review deadline.
U.S. Trade Representative Ambassador Jamison Greer said in a statement Wednesday that the United States does not agree to renew the trilateral agreement, also known as USMCA, “in its current form.”
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“The United States will continue to engage with Mexico and Canada to address deficiencies in the agreement and trade deficits with these countries; however, the agreement will remain in effect until these issues are resolved or the agreement is terminated,” the statement said.
It added that the United States is scheduled to meet with Mexico during the week of July 20 for the third round of bilateral negotiations related to the USMCA joint review.
The US decision not to renew the agreement came after US President Donald Trump repeatedly said he did not see the need for a trade deal.
“There’s no real benefit. It’s irrelevant,” Trump said in January, adding last month: “I don’t know if I’ll renew it.”
He also signaled he was open to negotiations with Mexico and Canada, saying, “We’re talking to them. We’ll see if they take some action.”
Here’s what we know about USMCA.
What is USMCA?
The trilateral agreement went into effect on July 1, 2020, during President Trump’s first term, and replaced the North American Free Trade Agreement (NAFTA).
According to the US State Department, USMCA has created “a more balanced and mutually beneficial trade that supports high-wage jobs for Americans and grows the North American economy.”
It also includes a chapter covering “digital trade, anti-corruption and good regulatory practices” and ensuring small and medium-sized enterprises benefit from the agreement.
However, the U.S. decision marks the beginning of a six-year review of the deal, which was based on the “sunset clause” negotiated during President Trump’s first term.
If no amendments are reached, the trade agreement will expire on July 1, 2036.
How is President Trump criticizing this agreement?
President Trump said of the deal last month: “We don’t need anything Canada has. We don’t need anything Mexico has, but they need everything we have. And they have to treat us better.”
Ahead of his statement, Greer said more time is needed to address USMCA issues, including the widening U.S. goods trade deficit with Mexico and Canada, reaching $197 billion and $48.3 billion, respectively, in 2025.
In the case of Canada, the United States’ largest oil supplier, much of the deficit is due to crude oil imports, but in the case of Mexico, the deficit widened as companies moved supply chains from China to Mexico in response to President Trump’s tariffs on Chinese-origin goods. This means that more goods are recorded as being imported into the United States from Mexico.
Additionally, Trump administration officials told Reuters that the president remains skeptical of any deal with Canada and Mexico, despite imposing 25% tariffs on their auto industries, 50% on metals and 10% on lumber.
How did Mexico and Canada react?
Mexico’s Economy Minister Marcelo Ebrard said at a press conference Wednesday that his country wants to help address U.S. concerns about job losses and trade deficits.
“I don’t see any major differences between Mexico, the United States and Canada that we cannot resolve,” said Ebrard, who participated in an online meeting with Gurría and Dominic LeBlanc, Canada’s minister for U.S.-Canada trade.
“We cannot allow our (automotive manufacturing) industry to be put in a disadvantageous position,” Ebrard said, adding: “I would say that the main point of discussion with the United States in all previous negotiations has been the protection of our auto industry.”
LeBlanc also said Canada will continue to address President Trump’s tariffs on its steel, aluminum, automobiles and lumber.
“We agreed on the importance of continuing discussions and identifying ways to ensure that the trade and investment framework between Canada, the United States, and Mexico continues to support the prosperity and competitiveness of North America,” he said.
What happens next?
Canada and Mexico are both willing to continue talks to resolve issues related to the USMCA agreement, which will continue until 2036.
President Trump may use tariffs to apply pressure during negotiations.
Alternatively, bilateral agreements may become more important than trilateral agreements. However, it is unlikely to match the strength or volume of transactions under USMCA.
