US declines to renew USMCA, begins annual reviews of $2 trillion trade deal

Part 1 of 5

The USMCA contains a built-in expiration clock. Article 34.7 of the agreement requires a mandatory joint review by the three governments exactly six years after the deal entered into force, which was July 1, 2020. If all three parties agree at that review to extend the agreement for another 16 years, it continues without interruption. If any party declines to confirm extension, the agreement shifts into a mode of annual reviews that repeat each year for up to 10 years, after which the agreement expires unless the parties reach a new deal. The United States triggered that annual-review track on July 1, 2026, by declining to confirm extension in a virtual trilateral meeting with Mexico and Canada.

The distinction matters practically. The agreement doesn't terminate immediately. It remains in force during the annual review period, meaning existing zero-tariff benefits, rules of origin, dispute settlement panels, and labor enforcement mechanisms stay active. But each year becomes a new potential pressure point for the US to raise demands or threaten non-renewal.

Part 2 of 5

USTR Ambassador Jamieson Greer was confirmed by the Senate on February 27, 2025, as the 20th United States Trade Representative, and he personally participated in the original USMCA negotiations during Trump's first term as Chief of Staff to then-USTR Robert Lighthizer. Greer's July 1, 2026 statement cited "shortcomings and our trade deficits with these countries" as the reason the US declined to renew. He framed the non-renewal not as a withdrawal but as leverage: "The United States will continue to engage with Mexico and Canada to address the Agreement's shortcomings."

A senior administration official told reporters the US is focused on strengthening rules of origin, reducing the bilateral trade deficit, and addressing what it describes as Canada's retaliatory tariffs from earlier in 2026. The official added that the president "retains an ability to exit the agreement earlier, should he see fit," a phrase that signals the annual review track isn't a safety net but a pressure mechanism.

Part 3 of 5

The trade relationship at stake is enormous. According to USTR data, US goods and services trade with USMCA partners totaled an estimated $1.8 trillion in 2022, the most recent year with full figures. Exports to Canada and Mexico were $789.7 billion; imports were $974.3 billion. The US goods trade deficit with USMCA partners was $210.6 billion in 2022, a 37.5 percent increase over 2021. Trump has consistently cited this deficit as evidence that the agreement doesn't work for the US, even though the USMCA he negotiated in his first term was designed in part to narrow it through tighter automotive rules of origin.

The automotive sector carries special weight. Vehicle manufacturers and their suppliers move parts across the US-Mexico-Canada border multiple times during production, relying on USMCA's requirement that 75 percent of a vehicle's content originate in North America to qualify for zero tariffs. Any renegotiation that tightens or unsettles those rules forces companies to recalculate where they source parts and build factories.

Part 4 of 5

The non-renewal coincides with a crunch in Trump's tariff toolkit. On February 20, 2026, the Supreme Court ruled in Learning Resources v. Trump that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unlawful. After the IEEPA tariffs fell, Trump invoked Section 122 of the Trade Act of 1974 (19 U.S.C. § 2132) as an alternative source of authority to maintain duties on imports. Section 122, a balance-of-payments provision from 1975, caps surcharges at 15 percent ad valorem and limits their duration to 150 days unless Congress extends them by statute.

That 150-day clock started when Trump proclaimed the Section 122 surcharges and expires around July 24, 2026. Congress has not moved to extend the authority. After July 24, Trump would need a different statutory hook to sustain tariffs on Canadian and Mexican goods outside the USMCA framework, making the bilateral negotiations scheduled for late July doubly significant.

Part 5 of 5

USMCA replaced the North American Free Trade Agreement (NAFTA), which President George H.W. Bush signed in 1992 and which entered into force on January 1, 1994. Trump ran against NAFTA in 2016, calling it "the worst trade deal maybe ever signed anywhere" and promising renegotiation. His administration completed the USMCA in 2018, and a bipartisan implementing bill passed the House 385 to 41 and the Senate 89 to 10 before Trump signed it in January 2020. The deal entered into force July 1, 2020.

At the signing ceremony, Trump called the USMCA "the fairest, most balanced, and beneficial trade agreement we have ever signed into law." Six years later, his administration declined to renew that same agreement in its current form, citing deficits it argues the deal failed to close. The contrast puts Congress in an awkward position: many members who voted for the implementing bill now face a White House that wants to reopen it.

Why this matters

U.S. Trade Representative Jamieson Greer, confirmed by the Senate on February 27, 2025, holds the sole executive authority to conduct USMCA negotiations on behalf of the United States, meaning every term discussed with Mexico and Canada in bilateral rounds goes through his office before it reaches Congress or the president.

Section 122 of the Trade Act of 1974 caps US tariff surcharges at 15 percent ad valorem and limits their duration to 150 days without a congressional vote to extend, leaving the executive branch with no legal tariff authority over Canadian and Mexican imports after approximately July 24, 2026, unless Congress acts or courts approve a new authority.

Matt Blunt, president of the American Automotive Policy Council representing Ford, General Motors, and Stellantis, called for swift resolution because USMCA's rules of origin require 75 percent North American content to qualify for zero tariffs, and uncertainty over those rules delays billions of dollars in capital investment decisions about where to build factories and source parts.

Mexico's Economy Secretary Marcelo Ebrard has participated in two rounds of bilateral USMCA talks with USTR without Canada present, and a third round is scheduled for the week of July 20, meaning the US may present Canada with a bilateral framework it had no role in shaping before the next annual review deadline.

SourcesTrade Representative·Ambassador Greer Issues Statement on the USMCA Joint Re…Jul 1, 2026ustr.gov·USMCA Agreement Text Final Provisions Chapter 34ustr.gov·USTR USMCA Trade and Investment SummaryCornell Law School Legal Information Institute·19 U.S. Code § 2132Jan 1, 2024Trade Representative·USTR LeadershipMar 1, 2025abcnews.com·US won't renew trade deal with Mexico and Canada that T…Brownstein Hyatt Farber Schreck·Trump Administration Decides Against Renewing USMCA, Op…Jul 1, 2026White & Case LLP·North America Prepares for 2026 USMCA Review and Potent…Jan 15, 2026