Annual reviews instead of 16-year extension; agreement could expire automatically in 2036

Trump rules out rubber-stamp renewal, ratcheting up pressure over tariffs and trade deficit

Withdrawal threat remains on table as North American trade uncertainty deepens

US President Donald Trump attends the Faith & Freedom Coalition's 2026 Road to Majority Policy Conference at the Washington Hilton hotel in Washington, D.C., on June 26 (local time). [Reuters]
US President Donald Trump attends the Faith & Freedom Coalition's 2026 Road to Majority Policy Conference at the Washington Hilton hotel in Washington, D.C., on June 26 (local time). [Reuters]

By Seo Ji-yeon, The Herald Business

The Trump administration has decided against renewing the United States-Mexico-Canada Agreement in its current form, opting instead for a process of annual reviews. The move is widely seen as an "America First" strategy aimed at preserving the North American free trade framework while using the agreement as a negotiating lever to maximize US trade interests.

US Trade Representative Jamieson Greer said in a statement Tuesday (local time) that "the United States does not agree to renew the USMCA in its current form," adding that Washington would continue consultations to address the agreement's shortcomings and the trade deficits with Mexico and Canada.

The USMCA replaced the North American Free Trade Agreement and was concluded in 2018 during Trump's first term, entering into force in July 2020. The agreement has a 16-year term, with the three countries required to jointly decide every six years whether to extend it.

Mexico and Canada both indicated during the current joint review that they favored a 16-year extension, but the renewal fell through after the United States declined to agree.

As a result, the agreement will not expire immediately and will remain in effect for the next 10 years, during which the three countries will conduct annual reviews and continue negotiations. If they fail to reach an extension agreement by 2036, the USMCA will automatically terminate.

The Trump administration has maintained that strengthening US negotiating leverage matters more than preserving the existing agreement unchanged.

A senior administration official said Trump "decided not to agree to a perfunctory renewal of the agreement without resolving existing problems, in the interest of American workers, businesses and farmers," describing the decision as "part of the process of reshaping trade policy on the basis of reciprocity and balance."

The decision is also being interpreted as a sign that Trump, who personally introduced the USMCA during his first term, is now looking to revise it in his second.

Bloomberg reported that the administration concluded the USMCA had shielded Mexico and Canada from some US tariff measures while falling short of expectations in reducing the US trade deficit.

In practice, the Trump administration has clashed with Canada over automotive and steel tariffs and has expressed frustration over Canadian retaliatory tariffs and boycotts of American alcohol. During the recent USMCA review process, the US held multiple formal negotiating sessions with Mexico while largely sidelining Canada.

The US is scheduled to hold bilateral USMCA negotiations with Mexico from July 20 to 24, and plans to hold separate consultations with Canada as well.

Markets are watching whether Trump will use the threat of withdrawing from the agreement as leverage in future negotiations.

A senior administration official said Trump "has the authority to terminate the agreement earlier if he determines it is necessary."

The USMCA has underpinned a free trade framework among the US, Canada and Mexico — three economies that together account for roughly one-third of global GDP. Trilateral trade stood at about $1 trillion when the agreement took effect, surpassed $1.6 trillion last year and is currently estimated at around $1.9 trillion.

However, the agreement's effectiveness has come under question after the US recently imposed steep tariffs on some Canadian and Mexican goods not covered by the USMCA, citing fentanyl trafficking. The rejection of the extension is expected to deepen uncertainty across the North American trade landscape.


sjy@heraldcorp.com