US President Donald Trump has declined to renew the United States-Mexico-Canada Agreement (USMCA), the landmark trade pact that he had once hailed as one of the biggest achievements of his first term, triggering a prolonged review process that could ultimately determine the future of North America’s free trade framework. While the agreement will remain in force for now, Washington’s decision has introduced uncertainty over trade worth nearly $2 trillion annually among the three neighbouring countries.
The USMCA, which came into effect in 2020 after replacing the decades-old North American Free Trade Agreement (NAFTA), includes a “sunset clause” requiring a formal review after six years. If all three member nations agree, the pact can be extended for another 16 years. However, by refusing to approve the extension in its present form, the Trump administration has set in motion annual reviews that could continue until 2036 unless a revised agreement is reached.
US Trade Representative Jamieson Greer said the administration believes the existing agreement has not adequately addressed America’s trade imbalances with Canada and Mexico. According to US officials, Washington wants significant changes before agreeing to an extension, including stricter rules governing regional manufacturing, particularly in the automotive sector, and stronger safeguards aimed at boosting American production while limiting indirect access for Chinese goods.
The move marks a dramatic shift for Trump, who had promoted the USMCA as a superior replacement for NAFTA during his first presidency, describing it at the time as a fairer and more balanced agreement for American workers. In recent months, however, he has repeatedly criticised the pact, arguing that it has failed to eliminate persistent trade deficits with America’s two largest trading partners.
Although the decision does not immediately terminate the agreement, it has created uncertainty for businesses and investors that rely heavily on integrated North American supply chains. Industry groups, particularly from the automobile and agricultural sectors, have warned that prolonged negotiations and uncertainty could discourage investment, increase production costs and disrupt manufacturing operations spread across the United States, Canada and Mexico.
Canada and Mexico have responded by expressing their willingness to continue negotiations. Mexican Economy Minister Marcelo Ebrard said Mexico intends to address Washington’s concerns while preserving the benefits of regional economic integration. Canadian officials have also indicated that they remain committed to working towards a revised agreement, although negotiations are expected to be complex given the growing disagreements over tariffs, market access and industrial policy.
Trade experts note that the review process allows the three countries to negotiate changes at any point during the next decade. If they eventually reach consensus, the agreement can still be renewed. However, failure to do so would mean the USMCA expires in 2036, potentially forcing North American trade to fall back on older bilateral arrangements or global trade rules under the World Trade Organization. Such an outcome could significantly alter regional supply chains and weaken North America’s competitiveness in the global economy.
Negotiators are expected to continue discussions later this month, with automotive rules of origin, market access, tariff policies and measures aimed at reducing dependence on overseas manufacturing likely to dominate the agenda. While all three governments have expressed interest in maintaining strong economic ties, Trump’s refusal to renew the agreement in its current form has ensured that the future of North America’s most important trade pact will remain uncertain for years to come.
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