The United States, Canada and Mexico are beginning negotiations over the future of a $1.9 trillion annual trade relationship as businesses push for stability after a year of tariff uncertainty.
By yourNEWS Media Newsroom
The United States, Canada and Mexico are entering negotiations over the future of the North American trade pact that governs nearly $1.9 trillion in annual goods and services exchanged among the three countries.
The U.S.-Mexico-Canada Agreement, known as USMCA, comes up for renewal Wednesday under a six-year review provision included when the pact replaced the North American Free Trade Agreement in 2020. The process is expected to stretch for months or longer, with auto manufacturing rules, Chinese supply chains, tariff uncertainty and President Donald Trump’s threats to withdraw from the agreement all shaping the talks.
The trade relationship touches industries across the continent, from Canadian auto parts feeding factories in the American Midwest to Mexican tequila and mezcal sold in U.S. bars and tourists traveling from American cities to resorts in Cancun. Canada and Mexico have also overtaken China as the United States’ top two trading partners.
After a year of Trump tariff policies, many companies in all three countries are seeking predictability. But the renewal process is expected to be difficult.
“There’s going to be a lot of drama this summer,” Diego Marroquín Bitar, a fellow in the Americas program at the Center for Strategic and International Studies, said last week during a USMCA forum hosted by the Cato Institute.
One major point of dispute is a U.S. push to shift more auto production into the United States. The demand could create more American auto factory jobs, but it could also disrupt supply chains that have been built over decades across the three countries. It could also increase vehicle prices at a time when the average new car already costs nearly $50,000.
USMCA replaced NAFTA in 2020 after Trump criticized the earlier pact as a driver of U.S. manufacturing job losses. NAFTA, enacted in 1994, removed most trade barriers among the three countries and allowed companies to move production to Mexico while shipping goods back to the United States duty free.
Trump’s USMCA retained much of NAFTA’s structure but added rules requiring higher wages at some factories and greater North American content in certain products. Those provisions were intended in part to keep Chinese-made goods from entering North America duty free through Mexico or Canada.
The agreement also included a renewal review every six years. Although Wednesday marks the first deadline, negotiators are not expected to settle the future of the pact immediately.
“Nothing is going to happen July 1,” said Oscar Ocampo, director of economic development at the Mexican Institute for Competitiveness.
The three countries could agree to renew USMCA unchanged for another 16 years, but that outcome is considered unlikely. Instead, they are expected to keep negotiating changes. If no agreement is reached by 2036, the pact expires.
Any of the three countries may also withdraw from USMCA by giving six months’ notice, a possibility that concerns Canada and Mexico because both depend heavily on trade with the United States.
Trump said in June that he was “not looking to renew” the agreement with Canada and Mexico.
“We don’t need anything that they have,” Trump said.
Ocampo said he suspects Trump does not actually want to abandon the treaty but may be using uncertainty to pressure Mexico over immigration and security issues.
The United States and Mexico have already held talks over the renewal, while Canada has so far remained more peripheral to the process.
Patrick Childress, a partner at Holland & Knight and a former U.S. trade negotiator, said Canada faces the risk of being presented with an agreement reached by Washington and Mexico City.
“The danger for Canada is this: that the U.S. government and the Mexican government reach agreement on changes to core provisions of the treaty and then show up in Ottawa and say: ‘Here’s what we’ve agreed to. You can take it or leave it,”’ Childress said.
Canadian Prime Minister Mark Carney said the three countries planned to meet virtually Wednesday.
“I’m not looking for my pen,” Carney said.
Carney later said in French that his priority is updating USMCA and that the United States cannot reach a new agreement without congressional approval.
A central U.S. goal is to further prevent Chinese goods from entering through Canada or Mexico. But the most contentious proposal concerns how much of a vehicle must be made in North America, and how much must be made specifically in the United States.
Under USMCA, automotive products must be 75% made in North America to qualify for duty-free treatment. That was an increase from NAFTA’s 62.5% threshold.
The United States wants to raise that 75% requirement. Childress said automakers have already spent years configuring supply chains to meet the current standard and would need time to adjust to a higher one.
Automakers already “have been fine-tuning their supply chains for years to be able to hit that 75% mark,” Childress said.
The United States is also seeking a new rule requiring that 50% of cars be made in the United States, Carney confirmed in early June. At present, none of the three USMCA countries has a guaranteed share of production.
Ocampo said that proposal is unacceptable to both Mexico and Canada.
“It’s a red line for both Mexico and Canada, and it goes against the spirit and the letter of regional integration,” Ocampo said.
Marcos Carias, an economist at credit insurer Coface, said only about 1 in 5 Mexican and Canadian cars imported into the United States would currently meet a 50% U.S.-content requirement.
Carias said models likely to face higher costs under the proposal include Ford’s Maverick compact pickup, Chevrolet’s Equinox midsize SUV and some Nissan sedans, all made in Mexico. His rough estimates suggest prices could rise 5% to 7% for the most affected models.
Beyond autos, businesses are seeking relief from trade uncertainty created by tariffs.
“My interest in this USMCA renewal is just consistency, right?” said Shawn Miller, co-founder of PKGD Group, which imports agave spirits including tequila, mezcal and raicilla from family producers in Mexico. “If the rules change, the rules change. But we’d really like to know (what they’re going to be) and we’d like them to stay that way for a while.”
PKGD, based in Holland, Michigan, has grown quickly. Sales are up 62% so far this year after rising 100% in 2025 and 300% in 2024.
But Miller said last year was difficult because of shifting tariff rules.
Trump imposed a 25% import tax on Mexican and Canadian goods in February, then exempted USMCA-eligible products a month later. Mexican spirits qualify for duty-free treatment under USMCA.
During the period of uncertainty, three truckloads of Mexican spirits imported by PKGD crossed the border and were hit with the 25% tariff. The cost was $105,000.
“For us, it was one unfortunate day!” Miller said.
Miller said PKGD and its Mexican suppliers had to quickly determine how to handle the expense.
“What can we absorb? What can they absorb?” Miller said. “How can we mitigate this?”
He said the businesses involved do not have the resources of major multinational companies.
Miller said he and his Mexican suppliers “are not large multinational corporations with dedicated trade departments, teams of lawyers, or lobbyists focused on trade policy.”
Small businesses in other sectors face similar challenges.
In 2014, Hollywood costume designer Kerry Mellin started EazyHold in Ventura County, California. The company sells silicone grips that help people with disabilities, including cerebral palsy and Parkinson’s disease, hold everyday items such as spoons, cups, pens and toothbrushes.
Mellin, who has dual U.S.-Canadian citizenship, said sales struggled when she introduced the product in Canada. She believes the silicone imported from Asia may have prevented the grips from meeting USMCA’s North American content requirements for duty-free treatment when crossing from the United States into Canada.
She said the rules are too complex for many small companies to navigate.
Mellin said EazyHold might qualify under USMCA standards, “but the rules are complex and unpredictable enough that I genuinely can’t be sure without hiring a trade attorney.”
She said the rules of origin should be loosened for small businesses that cannot afford higher-cost raw materials from North America.
“I do understand why the rule exists — to stop companies from routing Chinese goods through Mexico,” Mellin said. “I just wish it could tell the difference between that and a small family business in California making grip aids for people who can’t hold a fork. I’m not the problem they were trying to solve.”
The talks now underway will determine whether the three countries can preserve the stability businesses want while revising rules over autos, supply chains and outside competition. With Trump’s tariff threats and possible withdrawal hanging over the process, the renewal fight is expected to test the durability of the North American trade framework he created in his first term.
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