Washington Freezes the North American Trade Pact — and the Americas Feel It
Rio Times · Analysis
Key Facts
—What happened On 1 July 2026 the US declined to renew the USMCA in its current form at its mandatory six-year review.
—Still alive The pact stays fully in force; the 16-year extension is deferred, not lost, and it now faces annual reviews until 2036.
—The market The USMCA covers a North American market worth about US$1.8 trillion a year.
—The split The US is deep in bilateral talks with Mexico but has not begun substantive negotiations with Canada.
—Canada’s grievance Ottawa wants US tariffs on steel, aluminium, autos and lumber addressed in any deal.
—Latin America Mexico’s nearshoring boom and the wider region’s trade calculus now hinge on years of uncertainty.
The United States chose not to renew North America’s flagship trade pact, and by leaving it alive but unrenewed, opened a decade of uncertainty that reaches deep into Latin America.
The Decision That Reset the Clock
It was a single line, delivered while the meeting was still under way, and it changed the mood across a continent. Washington would not sign off on the deal as it stands.
[‘The United States did not agree to renew the USMCA in its current form. As a result, the USMCA is not renewed.’]
That was US Trade Representative Jamieson Greer, in a statement issued on 1 July 2026. The words were blunt, but the reality is more subtle than they sound.
Crucially, nothing was torn up. The decision triggers the annual joint review process, which will proceed each year until the parties either agree to an extension or the Agreement expires on 1 July 2036, but the Agreement remains fully in force and the 16-year extension is not foreclosed.
What was lost was certainty. A renewal would have reset the clock to 2042 and spared businesses a decade of recurring uncertainty.
Instead, North American commerce now faces a yearly cliff-edge.
A Pact Alive, But on a Yearly Leash
To understand the stakes, it helps to know what the USMCA actually is. It is not a small deal.
The scope is enormous. The pact, which replaced NAFTA in 2020, covers a market worth about US$1.8 trillion a year, and it stays in force while the three governments begin annual reviews that could run until it expires in 2036.
For now, the rules of the game are unchanged. Current tariff preferences, rules of origin, and investment protections are unaffected; the 16-year extension is deferred, not lost.
But businesses hate a moving target. One economist warned that mandatory annual reviews mean uncertainty prevails, which is a negative for decision-making for businesses, and a definite dampener.
The most-cited forecast is not collapse but limbo. The most likely scenario is that it will go into an annual renewal process, one analyst told Al Jazeera. Limbo, for a US$1.8 trillion supply web, is its own kind of cost.
Two Neighbours, Two Very Different Tracks
The most telling feature of this moment is the split screen. Mexico and Canada are being treated very differently.
Mexico is at the table. The US will meet with Mexico the week of 20 July for a third round of bilateral negotiations related to the USMCA joint review.
Canada is not — at least not substantively. Although Canada participated in the 1 July Commission meeting, it has not yet begun substantive text-based negotiations with the United States.
Ottawa’s priorities are clear even so. Canada’s trade minister confirmed the priority of addressing US sectoral tariffs on steel, aluminium, autos, and lumber, and had already signalled support for a 16-year renewal.
Washington’s grievance with Canada, meanwhile, has an unmistakable geopolitical edge — its trade chief tied the refusal partly to Canada’s pursuit of Chinese investment, dragging a distant rivalry into a North American room.
Why Trump Turned on His Own Deal
The strangest twist is that the president who built this pact is now its chief sceptic. This was his signature first-term achievement.
His public position has soured. Trump has repeatedly stated he wishes the USMCA did not exist, saying in January that there was no real advantage to it and calling it irrelevant.
His stance has also wobbled. I don’t know that I’m going to renew it, he said in June, adding that the US does not need anything Canada or Mexico has, but they need everything the US has, and they have to treat us better.
The driving grievance is the trade balance. Trump has long complained about US trade deficits with its partners, and in his second term imposed tariffs on nearly every country, including Mexico and Canada.
The ambiguity is the strategy. By keeping the pact alive but unrenewed, Washington preserves maximum leverage over two neighbours who badly want the certainty it just withheld.
The Nearshoring Bet Meets a Question Mark
For Latin America, the heart of this story is Mexico, and the heart of Mexico’s story is nearshoring. The pact’s certainty is what made that bet work.
The USMCA has been Mexico’s shield. The agreement has been particularly beneficial to Canada and Mexico in the wake of the tariffs that Trump unleashed after taking office for a second term.
Companies moved factories south precisely because tariff-free access to the US market looked locked in for years. An annual review process quietly chips away at that logic.
There is a counter-reading, too. If Washington cuts a strong bilateral deal with Mexico, the country could emerge more privileged than Canada — a nearshoring winner in a fractured pact.
Either way, the boardroom calculus has changed. A factory is a decade-long commitment; a trade deal reviewed every twelve months makes that commitment harder to sign, and Mexican industrial states will feel the hesitation first.
Ripples Across the Wider Region
Beyond Mexico, the whole hemisphere is watching how the United States treats its closest partners. The signal matters more than the specifics.
The message is that even a signature US trade deal is now negotiable at will. For Brazil, Colombia, Chile and the Mercosur bloc, that reframes every assumption about the reliability of American commitments.
It also sharpens the China question. Washington’s swipe at Canada’s Chinese investment ties is a warning shot other capitals will hear, as Beijing courts the region with infrastructure and mining money.
For commodity exporters, uncertainty in North American manufacturing feeds through to demand for their metals, energy and food. A hesitant factory floor in Monterrey is a softer order book in Santiago and São Paulo.
The strategic read is uncomfortable but clear. Latin America is being nudged to hedge — to deepen ties with Europe, Asia and each other rather than rely on a US trading order that just showed how conditional it can be.
The Curious Timing: A World Cup Own-Goal
The trade freeze arrived in the middle of a rare moment of North American togetherness — the three nations co-hosting the World Cup. The contrast was not lost on observers.
One former Mexican ambassador captured it with a football metaphor, warning that the uncertainty for North American competitiveness was astounding and, in World Cup terms, a huge own-goal.
The tournament itself is a reminder of what integration can look like. Over a six-week period it is expected to mobilise approximately 6.5 million attendees, including 2.6 million international visitors, generating an estimated US$9 billion in GDP across North America.
Mexico is the only Latin American host, and the lift is real if modest. The economic effects will be concentrated in Mexico, where the World Cup could add approximately 0.2 percentage points to economic growth in 2026.
The juxtaposition tells the story of the year: three neighbours cheering in shared stadiums while their governments quietly pull apart at the negotiating table.
What Happens Now
The path ahead is a slow-motion negotiation with several possible endings. None of them offers quick relief.
The near-term reality is the annual-review treadmill. The ‘at any time’ extension mechanism remains available and is the critical provision to monitor.
A future three-way renewal could still reset everything overnight.
The Mexico track moves first. The 20 July round in Mexico City will hint at whether Washington wants a fixed bilateral arrangement or simply leverage.
Canada’s opening is the harder read. Until Ottawa and Washington begin substantive talks, the risk of a drawn-out standoff — with tariffs on steel, autos and lumber unresolved — remains live.
For Latin America, the watchword is optionality. Governments and companies that diversify markets, court non-US capital carefully, and avoid betting everything on a single trade relationship will weather this decade of reviews far better than those who assume the old certainties still hold.
Frequently Asked Questions
Did the US cancel the USMCA?
No. It declined to formally renew the pact for another 16 years, but the agreement remains fully in force with all tariff and investment rules intact. It now faces annual reviews until it would otherwise expire in 2036, and a full extension can still be agreed at any time.
Why is the US treating Mexico and Canada differently?
Washington is already in bilateral negotiations with Mexico, with a round set for late July, but has not begun substantive talks with Canada. US officials have linked their reluctance partly to Canada’s pursuit of Chinese investment and unresolved sectoral tariff disputes.
What does this mean for Latin America’s nearshoring?
Mexico’s factory boom was built on the certainty of tariff-free US access, and annual reviews inject uncertainty into that bet. A strong US-Mexico bilateral deal could still leave Mexico a winner, but the wider region now sees fresh reason to diversify beyond dependence on US trade.
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