Although the US announced it would not to renew the USMCA for another 16-year term, the agreement remains in effect for the next decade. Ongoing annual joint reviews are necessary to maintain the critical economic integration and trade relationships between the United States, Canada, and Mexico, writes Luisa Blanco.
On July 1, 2026, Ambassador Jamieson Greer, the United States Trade Representative, issued a statement announcing that the US "did not agree to renew the USMCA in its current form."
Canada and Mexico had earlier staked out supportive positions for the USMCA. Canada expressed support for the renewal of USMCA in June, with Minister Dominic LeBlanc recognizing the North American trade relationship as “one of the most successful trading relationships in the world.” He noted Canada’s commitment to work towards a renewal of the agreement. Similarly, Mexican President Claudia Sheinbaum stated on June 30 that she signed a letter requesting an extension of the USMCA for another 16 years.
While there has been considerable media coverage of Ambassador Greer's statement, it is important to understand the agreement infrastructure and what "not renewed" actually means for the trade relationship of these countries.
The USMCA entered into force on July 1, 2020, and is built on the infrastructure of NAFTA, which entered into force in 1994. The agreement includes a withdrawal provision, under which one party may withdraw, with effect after six months' notice to the other parties. The USMCA also includes a provision for review and term extension, stating that the agreement will end after 16 years unless each party confirms an extension for another 16 years. This provision, which was a new provision of the USMCA, also notes that on the sixth anniversary, the parties will start a joint review. If a party does not confirm its wish to extend the term, the parties will conduct annual joint reviews for the remainder of the term (10 years).
Thus, given the outcome of the joint review on July 1, the agreement remains in effect for the next 10 years. The three countries will continue annual reviews and may extend the agreement at any time.
The US Constitution authorizes the President to make treaties with the advice and consent of the Senate, and authorizes Congress to lay duties and regulate foreign commerce. The USMCA was approved and implemented by Congress. The President must consult with two congressional committees, House Ways and Means and Senate Finance, and other stakeholders before each USMCA joint review. During this joint review process, members of Congress have expressed their views on USMCA, and the Office of the US Trade Representative requested public comments (September 2025) and held public hearings (December 2025). Congress may play an important role in the USMCA joint review and can investigate and assess how changes to the USMCA impact the US economy and international relations with Canada and Mexico.
Because Congress is authorized to regulate commerce, revisions to the USMCA might require congressional approval, but there is no precedent for how it should be involved in the current situation. The USMCA was negotiated under a time-limited trade promotion authority (TPA 2015), and since TPA expired in 2021 without reauthorization, future legislation will not go through an expedited process.
As we move forward with the annual joint reviews, in which countries can agree to renew the USMCA at any time, it is necessary to recognize the economic importance of this agreement to the US economy.
The USMCA infrastructure has helped to solidify the US trade relationship with Mexico and Canada. Figure 1 presents the total trade in goods (exports and imports) between the US and the nation's top five trading partners in 2025.
Mexico has been the largest US trading partner since 2023, with total trade valued at $872 billion in 2025. Canada is the second-largest trading partner, with $716 billion in total trade in 2025. Behind these numbers, four dimensions help in understanding the economic relevance of the 32-year-old North American free trade framework for the US economy:
The global economy in the last four decades has been built around integrated production, accelerated recently by nearshoring, which is central to the USMCA trade relationship. Nearshoring is the transfer of an industrial activity abroad to a nearby country, whether to an affiliate or through subcontracting to a non-affiliated company. Nearshoring has presented an opportunity for the US to reduce the cost of goods produced in Mexico and later imported into the US market. In the context of the concept of comparative advantage, introduced by David Ricardo back in 1817, the US benefits from its trade relationship by moving labor-intensive production processes to Mexico and concentrating capital-intensive production in the US. In fact, for every dollar of manufactured goods imported from Mexico by the US, an estimated 30 cents comes from US-produced content or materials.
This integrated production under the USMCA increases the competitiveness of US products, making them more attractive in international markets. For example, a typical production arrangement for American auto companies is to produce the car's frame in northern Mexico and assemble the car in central Mexico with a US-made engine. This integrated production process allows American cars to remain competitive in the global economy by leveraging lower input costs in Mexico. These cars are sold in Mexico, the US, Canada, and the rest of the world. According to a recent Wall Street Journal article, eight of 10 of the cheapest models available in the US are made abroad, and automakers warned that significant changes to the USMCA could make it difficult to continue offering affordable models. Thus, the USMCA trade framework is central to the US auto industry's competitiveness.
The USMCA is also beneficial to US products because it offers preferential tariff treatment in Mexico’s and Canada’s markets. Mexico and Canada are the first- and second-largest export markets for US products. In 2025, Mexico and Canada each accounted for about 15 percent of total US goods exports, representing together one third of total US goods exports. In 2025, the US accounted for 38-percent of Mexico's imports. In 2025, the US accounted for nearly 59-percent of Canadian merchandise imports.
The integrated production created by the USMCA has resulted in a tight investment relationship among its member countries. Based on figures as of year-end 2024, Canada was the sixth largest destination for US Foreign Direct Investment (FDI). Canada’s ranking reflects that four of the 5 countries above it are primarily financial holding centers (the Netherlands, Luxembourg, Ireland, and Singapore). In the same year, Mexico was the twelfth-largest destination, with the US position there growing 44-percent between 2020 and 2024. In relation to FDI in the US as of year-end 2024, Canada was the third-largest contributor after Japan and the United Kingdom, representing 13-percent of total FDI ($732.9 billion). Mexican FDI in the US as of the same date represented close to 1-percent of total FDI ($43.4 billion).
Given USMCA’s implications for US integrated production, competitiveness, access to markets, and investment relationships, it is necessary to have a well-defined and structured process for the joint reviews in the coming years. US policymakers should work closely with their Canadian and Mexican counterparts to sustain a trade agreement infrastructure that benefits all three economies. The stakes are high for all trading partners to strengthen USMCA infrastructure to meet the pressing needs of a dynamic global economy.
The author thanks Isabella Elias, MPP candidate at Pepperdine School of Public Policy, for research assistance.
