Trade · North America
Key Facts
- —The decision On 1 July 2026, the United States declined to extend the USMCA (United States-Mexico-Canada Agreement) for another 16 years.
- —The mechanism The pact does not expire bit by bit. It stays fully in force, but now faces a joint review every year through 2036.
- —The pressure Canada imposed tariffs of up to 50% on US goods from 8 September 2026, after trade talks broke down.
- —The catch Any of the three countries can still agree to extend the pact at any time, without renegotiating its text.
- —The stakes US goods and services trade with Canada and Mexico totalled about US$1.84 trillion in 2025, the most recent full year on record.
The USMCA did not expire this summer, and it is not expiring now. It stays fully in force, but it must now clear a review every year.
What actually happened in July
The USMCA replaced NAFTA, the North American Free Trade Agreement, in 2020. Its Article 34.7 set a 16-year term.
A review after six years let all three members agree, in writing, to extend that term to 2042. On 1 July 2026, the US Trade Representative, Jamieson Greer, announced Washington would not agree to that extension.
Greer had already testified to two congressional committees in December 2025, ahead of that review. That step is required under the USMCA Implementation Act, the US law that put the treaty into effect.
Under the treaty, all three governments must confirm an extension, or it does not happen. Neither Canada nor Mexico forced the issue either, so the six-year review closed without a renewal.
Total US trade in goods and services with its two neighbours reached about US$1.84 trillion in 2025, the most recent full year. That is based on estimates from the Office of the US Trade Representative (USTR), Washington’s trade negotiating agency.
Most of that trade was in goods, with services making up the rest. Mexico overtook China in 2023 to become the single largest source of US imports.
It remains the top overall US trading partner today.
The mechanism, precisely
Refusing to extend does not end the USMCA or shrink its coverage. Current tariff preferences, rules of origin and investment protections continue unchanged.
Instead, the treaty’s own Free Trade Commission must now meet for a joint review every year until 2036. It is made up of the three countries’ trade ministers.
That leaves as many as ten annual reviews before the original 16-year term ends in 2036. Each review is a fresh chance to agree on a full extension instead.
At any point before 2036, the three governments can confirm a full extension in writing. No new treaty text is required to do so.
So “expires a little every year” overstates the legal reality. Nothing in the pact shrinks automatically — the review is a recurring conversation, not a countdown clock on the agreement’s terms.
Why Washington chose control over certainty
The logic is simple: control, not urgency. A pact under annual review lets the United States raise fresh demands each year, without a full renegotiation.
These demands can cover Mexican energy policy, Chinese investment screening, or labour enforcement. None of it requires reopening the treaty’s text.
For Mexico City and Ottawa, the review era means planning investment differently. The relationship is renegotiated in spirit every twelve months, even though its wording stays the same.
The China chapter
Behind the procedural story is a strategic one. Chinese manufacturers use Mexican factories to reach the US market, and Washington wants USMCA rules to police that route more tightly.
Investment-screening rules and stricter content requirements are likely items on future review agendas. Mexico faces pressure to balance its largest customer against a major source of new investment.
Chinese automaker GAC is opening Mexico’s first wholly Chinese-owned assembly plant, in the second half of 2026. USMCA’s origin rules are Washington’s main tool for limiting how much of that output can enter the US duty-free.
BYD, another major Chinese automaker, suspended its own Mexico factory plans in 2025. It cited uncertainty over US trade policy.
Mexico raised its own tariff on Chinese-made vehicle imports to 50% from 1 January 2026. That followed pressure from Washington during the USMCA review process.
Canada’s separate tariff fight
The dispute began on 22 August 2026, when the US imposed a 50% tariff on C$27.6 billion (US$18.7 billion) of Canadian goods. Trade talks between Ottawa and Washington collapsed the same week.
Canada announced matching counter-tariffs on 8 September 2026, covering C$27.6 billion (US$18.7 billion) of US goods. The rates also ran from 15% to 50%, matching the US tariff on each product.
They doubled Canada’s existing 25% tariffs on some US steel and aluminium products. This dispute runs alongside the treaty review, not inside it.
It shows how quickly relations can turn tense while the underlying agreement stays untouched.
What the pact actually covers
USMCA’s automotive rules require 75% of a car’s value to originate in North America. They also set a wage rule.
At least 40% of a car’s labour value — 45% for light trucks — must come from workers paid US$16 an hour. That wage floor has not changed since 2020, though the required labour share rose from 30% to 40% by 2023.
The deal also sets rules for dairy market access, labour enforcement, and digital trade. Each is a standing point of friction that future annual reviews are likely to revisit.
What it means for the region
Mexico depends on the US market and is central to US supply chains at once. Its approach is to stay too integrated to be easily punished.
Canada’s instinct, shown by its tariff response, is to retaliate visibly while negotiating quietly. Both governments now plan around one fact.
The pact’s shape is fixed through 2036, but the political mood around it can shift every year. That gap between legal certainty and political noise is the review era’s real effect.
What companies should do now
Legal and trade advisers suggest three steps. Map which products rely on USMCA rules of origin, and which supply chains touch Chinese inputs that new screening could affect.
Then write review-year flexibility into new cross-border contracts, covering pricing and termination if tariffs move. None of this means leaving North America — the integration is too deep to unwind quickly.
The treaty’s core terms stay fixed regardless of any single year’s review. If the three governments never agree to a fresh 16-year term, annual reviews continue routinely through 2036.
The original 16-year term then ends on its own, unless the three sides negotiate something new before that date. Analysts see that as the more likely outcome, though nothing is fixed a decade out.
Connected Coverage
Washington Declines to Extend the USMCA, Starting a Decade of Annual Reviews
What Canada’s 50% Tariffs Mean for the Mexico USMCA Review
USMCA 2026: The Complete Guide to the Trade-Pact Review
The Big Picture
USMCA 2026 — all our coverage of the review and its fallout
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