The review continues: USMCA faces uncertain future

The United States–Mexico–Canada Agreement (USMCA) required the USMCA Free Trade Commission to conduct a joint review of the agreement on July 1, 2026. The outcome of the meeting is that the US did not agree to renew the USMCA in its current form. The US Trade Representative (USTR) reports that the US will continue to engage with Mexico and Canada to address the USMCA’s shortcomings, as well as US trade deficits with these countries. This includes a third round of bilateral negotiations between US and Mexico on July 20.

The US decision triggered a cycle of annual joint reviews over the next 10 years, while the original 16-year USMCA plan keeps the treaty fully operational until July 1, 2036. However, any of the three countries can still withdraw from the agreement if they provide six-month’s notice.

Victory Or Setback?

“July 1 did not settle USMCA’s future. It opened the next phase of the review,” explains Blake Harden, Managing Director, Washington Council, Ernst & Young (EY). “The agreement did not expire, nor was it renewed for another 16 years. It remains in force through 2036, meaning there is no immediate disruption to North American trade.”

Harden continues, “This is neither a clear victory nor a setback. Rather, it signals that the parties are taking additional time to work through complex issues. The United States and Mexico have begun formal review discussions, while the United States and Canada continue to engage more informally. That continued engagement is a constructive sign, although a trilateral outcome will ultimately be needed to achieve many of the administration’s broader objectives.”

Harden adds, “For businesses, the key issue moving forward is the uncertainty surrounding the future rules governing preferential treatment, investment decisions, and market access as negotiations continue.”

William Alan Reinsch, Senior Adviser and Economics Program and Scholl Chair in International Business at Center for Strategic and International Studies (CSIS) says that USMCA uncertainty could be intentional because it is expected to drive companies to invest in the US rather than Canada or Mexico, but he believes the more likely outcome is most companies putting plans on hold.

“If companies don’t know what tariffs or other regulatory requirements, they will face in six months or a year, they will usually wait until they have greater confidence about the future,” says Reinsch. “Even companies already located in the United States that have substantial exports to Mexico or Canada will hold off on new US investment if they don’t know what their future tariff liabilities will be.”

“While some customers are taking a wait-and-see approach to the USMCA review, their focus is on building supply chains that can quickly adapt to changing conditions and avoid single points of failure,” adds Mark Kunar, CEO, DHL Supply Chain North America.

Supporting North American Trade

The US decision not to renew has prompted many to express support for USMCA.

“The USMCA is one of the world’s most important trade agreements,” asserts Professor Steven Altman of New York University Stern School of Business. “It enables efficient and reliable supply chains to operate across three of the world’s largest and most complementary economies.”

According to CSIS, Canada and Mexico have remained the United States’ leading trading partners since the USMCA took effect in 2020. Outcomes attributed to the agreement include a 37% increase in intra-regional trade in goods and services, an 18% increase in jobs supported by USMCA-related trade, and a 16% increase in foreign direct investment across North America.

Agriculture serves as a specific example of USMCA support for US industry. A July 1 letter to the USTR from members of the House Agriculture Committee states, “USMCA provides markets and opportunities for US agriculture, contributing to increased exports, stability and jobs. Since USMCA was enacted in 2020, Mexico and Canada have collectively scaled up imports of US agricultural goods by $20 billion, totaling $60 billion in 2024. Economic models show that in 2024 alone, agricultural and seafood exports to Canada and Mexico generated $149 billion in total economic contribution to the US economy, supporting nearly half a million American jobs and generating $36 billion in wages.”

Port Laredo, the leading land gateway for US-Mexico trade, presents another example of the positive impact of USMCA. “USMCA has been instrumental in strengthening North American supply chains and supporting the continued growth of trade through Port Laredo,” says Felipe “Flip” Romero, Senior Marketing Communications Executive for the City of Laredo. “As the nation’s premier inland port, we recognize the importance of maintaining a stable and predictable trade framework that allows businesses on both sides of the border to invest with confidence. We support continued dialogue among the three countries and remain committed to working with our federal, state, local, and binational partners to ensure the efficient movement of commerce and the continued competitiveness of North American trade.”