USMCA Agreement Shifts: U.S. Abandons Renewal for Annual Reviews, North American Supply Chain Uncertainty Intensifies

The United States has decided not to renew the trade agreement with Canada and Mexico, instead adopting a year-by-year review mechanism, adding new uncertainty to the future of the North American supply chain.

U.S. Trade Representative Jamieson Greer stated that the Trump administration "is not prepared to accept the agreement as is," believing there are "substantive issues" that require multiple adjustments to address imbalances.

The United States-Mexico-Canada Agreement (USMCA) itself will remain in effect for up to ten years, unless a member country chooses to withdraw. However, abandoning a long-term renewal in favor of annual reviews means that negotiations over cross-border supply chain rules and critical low tariff treatment across North America will be fraught with uncertainty for years to come—especially important for automakers, agriculture, and energy companies.

This decision marks a sharp reversal in Trump's stance—he was the one who pushed for the agreement during his first term, calling it "the best and most important trade deal ever."

In his second term, however, Trump's position on the agreement has clearly cooled, in part because the deal shields a large volume of trade from the tariffs he seeks to impose and has failed to significantly narrow the U.S. trade deficit with Mexico and Canada.

How the Review Mechanism Works

Under the new annual review arrangement, the three countries can continue trying to reach an agreement over the next decade. If no solution is reached during this period, the agreement will expire in 2036.

Although the U.S. decision was expected, it still marks a major shift. The agreement could have been extended for 16 years on Wednesday—the sixth anniversary of its entry into force—but this scenario was unlikely from the start, as Trump had made clear he wanted adjustments or to go it alone, part of his broader strategy to reshore manufacturing and extract more concessions from trade partners.

Patrick Childress, co-chair of the USMCA team at Holland & Knight, said:

"We are facing ongoing negotiations, and we don't know when they will end, nor is there a short- or medium-term mandatory mechanism to push them to a conclusion, which naturally creates some uncertainty for businesses."

Trade Volume and Economic Impact

Since its implementation, the USMCA has effectively boosted economic activity among the three countries. Together, their economies account for about one-third of global GDP, and intra-regional trade has grown from $1 trillion when the agreement took effect in 2020 to over $1.6 trillion in 2024.

During a period of turmoil caused by tariff disputes between Trump and other major trading partners, the USMCA has provided a degree of stability for related trade. While Trump imposed new tariffs, he granted broad exemptions for products eligible under the USMCA, thus mitigating the impact on Mexico and Canada.

However, other U.S. tariffs on products such as automobiles and metals remain pain points in negotiations with Mexico and Canada and will cast a shadow over future talks.

Business Concerns and Demands

Given the geopolitical backdrop and Trump's trademark "maximum pressure" style, the prolonged negotiation process could prompt companies to delay potential investment decisions. Lobbying groups such as the U.S. Chamber of Commerce and the Business Roundtable have been urging governments to strengthen and preserve the agreement.

Madeline Chalecki, Deputy Director of the Geo-economics Center at the Atlantic Council, said this week:

"Supply chains require 30 years of visibility, not five. Uncertainty could dampen investment and growth intentions."

In May, multiple industry associations representing most of the North American automotive market wrote to Greer, urging the government to strengthen and extend the agreement.

In June, the U.S. Chamber of Commerce gathered over 70 corporate partners on Capitol Hill to pressure lawmakers, calling for "support for maintaining the current framework, pushing the three governments to fully implement the agreement, and promoting an efficient and orderly review that brings certainty to businesses."

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