Trump's refusal to renew USMCA could impact $1.6 trillion trade with Canada and Mexico

The United States has decided not to renew the US-Mexico-Canada Agreement (USMCA), which governs $1.6 trillion in trade between the three nations. The announcement came on July 1, 2026, just before the agreement’s first joint mandatory review was set to take place. US Trade Representative Jamieson Greer stated that the US would not agree to renew the agreement "in its current form."

Greer emphasized that the US will continue discussions with Mexico and Canada to address the agreement's shortcomings, particularly trade deficits. The US's decision comes after Donald Trump has consistently questioned the need for the trade deal, stating in January that it was "irrelevant" and expressing doubt about its renewal last month.

Understanding the USMCA and Its Background

The USMCA replaced the North American Free Trade Agreement (NAFTA) on July 1, 2020, during Trump's presidency. The agreement aimed to create a more balanced trade environment and support high-paying jobs for Americans. It included various chapters addressing digital trade, anticorruption, and provisions for small and medium-sized enterprises.

However, Trump's criticism of the agreement has been vocal. He remarked, “We don’t need anything that Canada has. We don’t need anything that Mexico has, but they need everything that we have.” His administration has pointed to the growing trade deficits with Mexico and Canada, which reached $197 billion and $48.3 billion respectively in 2025, as significant concerns.

Trade Deficits and Industry Responses

The trade deficits have been attributed to various factors, including increased oil imports from Canada and shifting supply chains to Mexico due to tariffs on Chinese goods. Additionally, despite imposing tariffs on both countries' automotive and steel industries, Trump remains skeptical of any deal.

In response, Marcelo Ebrard, Mexico's Economy Minister, expressed a willingness to address US concerns regarding job losses and trade deficits. Ebrard stated, “There is no difference that I can identify between Mexico, the United States and Canada that is so big that we cannot resolve it.”

Future Implications and Next Steps

According to the US trade representative, the USMCA will remain in force pending resolution of the identified issues or the agreement’s eventual termination. The decision not to renew the deal will trigger a six-year review under a “sunset clause” negotiated during Trump's first term. Without amendments, the agreement will expire on July 1, 2036.

Both Mexico and Canada have indicated their openness to continuing negotiations. The potential for bilateral agreements may increase, but these would likely not match the trading strength of the existing USMCA.