US declines to extend North American trade deal, starting clock to end it while seeking changes

Highlights:

• US denies extension of US-Mexico-Canada Agreement for 16 years without changes
• USMCA remains in place for 10 years with annual review before expiring
• More US-Mexico negotiations scheduled the week of 20 July
• Mexican economy minister says US, Mexico still divided on automotive rules of origin

The Trump administration on Wednesday declined to extend the US-Mexico-Canada Agreement, starting a decade-long clock to wind down the trade deal as it seeks changes to try to reshore manufacturing jobs and reduce US trade deficits with its North American neighbours.

The decision, announced after a six-year review of the North American free trade zone, keeps the agreement in place for another 10 years with annual reviews before it expires, unless the three countries agree to renew it with changes.

"The United States did not agree to renew the USMCA in its current form," US Trade Representative Jamieson Greer said in a statement. "As a result, the USMCA is not renewed. The United States will continue to engage with Mexico and Canada to address the agreement's shortcomings and our trade deficits with these countries."

Greer said the US will proceed with a USMCA bilateral negotiating round scheduled with Mexico during the week of 20 July. A senior administration official said that those talks in Mexico City would focus on strengthening North American rules of origin for autos and other industrial goods and economic security to keep other countries, including China, from benefiting from USMCA access.

Mexican Economy Minister Marcelo Ebrard told a news conference that Mexico wanted to help address US concerns about job losses and trade deficits, but the US and Mexico remain divided over US demands for stricter regional automotive rules of origin.

"There is no difference that I can identify between Mexico, the United States and Canada that is so big that we cannot resolve it," said Ebrard, who participated in a virtual meeting on Wednesday with Greer and Dominic LeBlanc, the Canadian minister responsible for US-Canada trade.

"We wouldn't allow our (auto) industry to be at a disadvantage," Ebrard said. "I'd say that has been the main point of discussion with the United States in all these talks: protecting our automotive industry."

LeBlanc added that Canada would continue to work to address President Donald Trump's tariffs on Canadian steel, aluminium, autos and lumber.

"We agreed on the importance of continuing our discussions and identifying ways to ensure trade and investment frameworks between Canada, the United States and Mexico continue to support North American prosperity and competitiveness," he said.

Denial long expected

The USMCA was negotiated by Trump's first administration to strengthen the 1994 North American Free Trade Agreement and underpins a highly integrated regional economy with some $1.6 trillion in annual trilateral trade.

The US decision was widely expected, as Greer said that more time was needed to address problems with USMCA, including persistent and growing US goods trade deficits with Mexico and Canada that reached $197 billion and $48.3 billion in 2025, respectively.

Much of the deficit with Canada is driven by oil imports, while the deficit with Mexico has grown as companies shifted supply chains away from China in response to US tariffs on Chinese goods.

The senior Trump administration official told reporters that it was still in US interests to come to agreement on possibly separate trade "protocols" with Mexico and Canada "as quickly as possible", but did not provide an expected time frame.

But the official added that Trump, who has already changed the USMCA relationship by imposing tariffs of 25% on Mexican and Canadian autos, 50% on metals, and 10% on lumber, is likely to remain sceptical of any deal.

Trump has repeatedly said that the US would do better without USMCA despite launching it in 2020 as "the best agreement we've ever made."

In two rounds of negotiations with Mexico, Trump's administration has demanded that North American-built vehicles contain 50% US content, pushing the regional total to 82%.

Affordability questions

Industry groups, including those representing automakers, have called for continuation of USMCA as a trilateral deal with duty-free trade to keep US manufacturing competitive against competitors in Asia and Europe.

Nissan CEO Ivan Espinosa told Reuters that the future of the USMCA, including potential requirements for more US content, could worsen a growing affordability problem for American car buyers and this needs to be considered by policymakers.

Nissan builds two small cars in Mexico for the US market — the Versa and Sentra — both now subject to a 25% tariff, but they remain profitable, he told Reuters in an interview in New York.

"You cannot build all the parts in the US. The supply chain is not set up to do that," he said. "We need something that is actually executable."

Farm groups also have been calling for continuation of USMCA, as Mexico and Canada together purchase more than a third of US agricultural exports.

"USMCA is without a doubt critical to the livelihood of farmers, fishers and rural communities across the country who rely on exports to Mexico and Canada, and to obtain key inputs used in US farming operations," said Bryan Goodman, a spokesperson for the Agricultural Coalition for USMCA, whose members include corn and soybean growers to distiller and meatpacker groups.

"We are encouraged by the negotiations already underway and urge all three countries to continue making progress towards a renewed and strengthened agreement."