US decision not to renew USMCA triggers annual trade reviews: USTR

The US will not renew the United States-Mexico-Canada Agreement, a sprawling trade pact covering North America, by a July 1 deadline, triggering a cycle of annual reviews that could have significant implications for North American supply chains.

The office of the US Trade Representative announced the decision not to renew in a statement released July 1, after senior officials confirmed the decision on a call with reporters the same day.

"The United States will continue to engage with Mexico and Canada to address the agreement's shortcomings and our trade deficits with these countries," the USTR office said.

The US Trade Representative hosted a virtual meeting on July 1 with Mexico and Canada to conduct the review ahead of the July 1 mandatory review deadline. Had the US agreed to renew the trade pact, as Canada and Mexico want, it would have continued for 16 years.

Now, the USMCA punt sets in motion a period of annual reviews over the next decade as the three countries continue to negotiate proposed changes. The trade pact will remain in effect until 2036 unless one of the countries gives a six-month exit notice.

The Trump administration's decision adds to market uncertainty and raises questions over which products could eventually lose preferential treatment under the agreement's rules of origin clauses or via USMCA-compliant status, among other things.

The move comes as President Donald Trump has increasingly relied on tariffs as a key trade policy tool, including implementing 50% duties on steel and aluminum imports, and country-specific tariffs. The Supreme Court struck down the country-specific, or reciprocal, tariffs in February.

A senior administration official told reporters the Trump administration would not renew the agreement until existing issues are addressed.The official said the USMCA, as it stands, does not control the US trade deficit with Canada and Mexico as intended.

Additionally, the official pointed to Trump's other trade policies – including his various tariffs – as already changing the nature of the US-Canada-Mexico trading relationship over the past year.

Aluminum, steel and copper from Mexico and Canada remain subject to the 50% Section 232 metals tariffs despite USMCA remaining in effect. Canada and Mexico are expected to seek relief from those tariffs as part of negotiations and indicated support for extending the agreement.

The senior administration official said any changes to these duties would need to meet Trump's goal of reducing the trade deficit and reshoring manufacturing, amid the Trump administration's efforts to boost American supply chains and incentivize domestic production.

Trump previously signaled he would not support renewing the agreement, which replaced the North American Free Trade Agreement during his first administration.

The US is expected to meet with Mexico the week of July 20 for a third round of bilateral negotiations with discussions focused on rules of origin, economic security, labor environment and intellectual property, the senior administration official said.

Steel, aluminum sectors seek stronger trade laws

The US aluminum sector has been focused on advocating for heightened North American trade monitoring and harmonization, and has emphasized the need to address transshipment from China and other non-market economies through Mexico.

"The USMCA review is a chance to fix what doesn't work and ensure that North American countries trade fairly with each other," said Charles Johnson, president and CEO of the DC-based Aluminum Association trade group, before the US announced the decision. "North America needs to act as one market when it comes to keeping unfairly traded aluminum outside of the region. That means aligned tariffs, better data, stronger rules of origin and real enforcement at every border. And there needs to be consequences when any of these countries act unfairly."

The North American aluminum sector is tightly integrated among the three neighboring countries.

The US is heavily reliant on primary aluminum supply from Canada, and 90% of the aluminum scrap imported to support US manufacturers comes from Canada and Mexico, according to the Aluminum Association.

The association has previously warned that 50% tariffs on primary aluminum imports from trusted trade partners such as Canada could negatively impact the domestic sector.

For steel, domestic steel industry leaders have called on the US to negotiate stronger trade laws across North America in the USMCA, which would also help curb transshipment. The US steel sector has warned of cheap steel imports entering the country through Canada and Mexico.

The domestic industry wants tougher rules governing North American melted and poured requirements for automotive products, as well as provisions that require steel to be melted and poured in North America to be considered USMCA-compliant.

Industry representatives have also told the Trump administration to reject any efforts to ease or eliminate the 50% steel tariff, which is a top priority for Canada and Mexico, as both countries have been economically wounded by the duties.

American Iron and Steel Institute President Kevin Dempsey told Platts in June he was optimistic that the countries would reach an agreement between the end of 2026 and mid-2027.