USMCA Exit Countdown Begins As US Rejects Extension Plan

The Trump administration is expected on Wednesday (June 30, local time) to formally announce that it will not extend the USMCA, a decision that would initiate a 10-year exit countdown and gradually unwind a 32-year-old North American free trade framework.

President Donald Trump has already indicated that he does not intend to renew the agreement. On June 10, speaking to reporters at the White House, he criticized the United States' trade deficits with Canada and Mexico, arguing the United States does not need what the two countries supply, while also suggesting ongoing engagement with their leaders could still lead to revised terms through negotiation.

Under the agreement's framework, July 1, 2026 marks the scheduled six-year review point, at which the three countries may agree to automatically extend the pact by 16 years, pushing its validity to 2036. If no extension is agreed, the deal does not immediately terminate. Instead, it would enter a 10-year rolling review period from 2026 to 2036, during which any party may withdraw with six months' notice, leading to full expiration on July 1, 2036.

Trade officials from the United States, Mexico, and Canada are expected to hold a video conference on Wednesday to signal whether they support extending the agreement by another 16 years. U.S. Trade Representative Jamieson Greer has also scheduled a third round of talks with Mexico for the week of July 20, underscoring continued efforts to revise the deal.

"We expect July 1 to pass and the United States will not confirm its intention to extend the agreement," said Greta Peisch, former general counsel at the Office of the U.S. Trade Representative and now a trade partner at Washington law firm Wiley Rein.

Mexico's Economy Minister Marcelo Ebrard said on Tuesday he expects the trilateral trade pact will not be dismantled. Mexican President Claudia Sheinbaum also stated she has signed a letter calling for a 16-year extension of the agreement.

The North American Free Trade Agreement, which USMCA replaced, was negotiated during Trump's first term, signed in 2018, and came into force in 2020.

At the time, Trump described the deal as "the most fair, balanced, and beneficial trade agreement we have ever signed into law." However, his position shifted as the U.S. goods trade deficit with Mexico widened, partly due to supply chain relocations to Mexico and Canada following earlier tariff actions against other countries.

Trump has repeatedly signaled opposition to renewing USMCA, instead favoring higher tariffs on automobiles, steel, and aluminum from Mexico and Canada.

Currently, the United States is conducting formal negotiations only with Mexico, excluding Canada. The two sides continue to face multiple trade disputes, including Canada's restrictions on dairy market access and provincial-level removals of U.S. alcoholic beverages.

Despite intensified negotiations, progress has been limited. Discussions have included stricter regional content requirements for North American automotive production and measures aimed at preventing third-country goods from benefiting from USMCA preferences.

According to people familiar with the talks, Greer's team has proposed that all vehicles manufactured in North America include at least 50% U.S.-sourced components, which would effectively raise the regional content requirement to 82% to qualify for U.S. tariff preferences. Greer has also indicated that vehicles assembled in Mexico and Canada could still face partial tariffs.

A Mexican official said the United States and Mexico have discussed a possible 15% uniform global tariff on automobiles, with lower rates for vehicles from Mexico and Canada if stricter rules of origin are accepted by both countries.