By Elsie Kamsiyochi
The United States is set to take a major step toward reshaping trade across North America by formally declaring that it will not extend the U.S.-Mexico-Canada Agreement (USMCA), a move that will begin a 10-year countdown toward the agreement’s possible expiration in 2036 unless all three countries negotiate a new deal.
The announcement is expected to coincide with a virtual meeting of trade officials from the United States, Canada, and Mexico, where the future of one of the world’s largest free trade agreements will be discussed. While the declaration does not immediately end the pact, it activates the agreement’s “sunset clause,” requiring regular reviews and negotiations over the coming decade.
The USMCA, which replaced the North American Free Trade Agreement (NAFTA) in 2020 during President Donald Trump’s first administration, was originally presented as a modernized framework designed to strengthen regional manufacturing, protect workers, and create fairer trading conditions among the three neighboring economies. However, President Trump has since expressed growing dissatisfaction with the agreement, arguing that it has failed to reduce the United States’ trade deficit with Mexico and has not delivered the manufacturing revival he expected.
Administration officials are expected to continue pushing for sweeping reforms rather than extending the agreement in its current form. Among Washington’s biggest demands are stricter rules requiring a greater share of vehicles sold under the agreement to be built with American-made parts. U.S. negotiators reportedly want North American-built vehicles to contain at least 50% U.S.-made content, significantly increasing the regional content requirements needed to qualify for duty-free treatment.
The United States is also seeking stronger safeguards to prevent Chinese products from entering North American markets through Mexico or Canada by taking advantage of USMCA trade benefits. Officials argue that tighter rules are necessary to strengthen regional supply chains and reduce dependence on imports from Asia.
Trade experts say Wednesday’s declaration is largely procedural but highly significant. It begins a six-year review process, followed by annual discussions if no consensus is reached. Should negotiations fail throughout the review period, the agreement would automatically expire on July 1, 2036, ending more than four decades of North American free trade cooperation that began under NAFTA in 1994.
Despite the formal declaration, negotiations are expected to continue intensively. U.S. Trade Representative Jamieson Greer has already scheduled another round of talks with Mexican officials later in July, signaling that Washington remains committed to securing major revisions before considering any long-term extension.
Interestingly, negotiations are currently focused almost entirely on Mexico, while Canada remains largely outside the formal bargaining process. Trade tensions between Washington and Ottawa continue over several longstanding disputes, including Canada’s protected dairy market and actions by some Canadian provinces that removed American alcoholic beverages from store shelves. Although discussions between U.S. and Canadian officials continue, no formal negotiating schedule has yet been announced.
Mexico, meanwhile, appears willing to negotiate many of Washington’s concerns. Officials from both countries reportedly agree that North American manufacturing has weakened over time, with increasing reliance on imported Asian components and declining U.S. content in automobile production. The two sides are now focused on finding practical ways to strengthen regional manufacturing while preserving the competitiveness of the automotive industry.
Mexican officials have also discussed the possibility of introducing a universal 15% tariff on imported automobiles, with lower tariff rates for vehicles produced in Mexico and Canada if they comply with stricter regional production rules.
Business leaders and manufacturers across North America are closely watching the negotiations, as the outcome could reshape supply chains, investment decisions, and production strategies for years to come. The automotive industry, in particular, could face significant adjustments if tougher rules on regional content are adopted.
Although the declaration starts the countdown toward the agreement’s possible end, analysts believe the next several years will likely be dominated by intense negotiations rather than an immediate collapse of the trade pact. Whether the three countries can bridge their differences will determine the future of North American economic integration and one of the world’s most important trading relationships.
Source Reuters
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