US declines to renew USMCA, retains annual review provision

The United States has refused to renew its long-running trade agreement with Mexico and Canada, opting instead for annual reviews rather than committing to another 16-year term. The decision ensures that the United States-Mexico-Canada Agreement (USMCA) technically remains in effect but opens the door to years of renegotiations over the rules governing supply chains across the continent. The president “chose not to approve the USMCA renewal without addressing existing issues,” a senior Trump administration official told reporters on a call. According to Bloomberg, US Trade Representative Jamieson Greer explained: “We think there are significant issues [with the current terms].” Trump previously threatened to withdraw from USMCA in June. Arguably more than any other industry, the automotive industry has a lot of influence on the outcome of the negotiations. USMCA’s duty-free provisions allow parts to cross U.S., Mexican and Canadian borders multiple times before a finished vehicle reaches the assembly line, and roughly 90% of imports from Canada and Mexico are now registered as USMCA compliant. Trade groups, including the Alliance for Automotive Innovation and the National Automobile Dealers Association, have called on the three governments to quickly expand the agreement and provide billions of dollars in U.S. vehicle manufacturing investment and thousands of manufacturing jobs. Automakers supporting the call included General Motors and Toyota. Meanwhile, the Trump administration is pushing for new conditions that would significantly disadvantage automakers whose production and supply chains are spread across three countries. Specifically, it seeks to raise the North American content threshold to 82% for vehicles to qualify for preferential treatment under the USMCA; 50% must be of US origin. The risks for business more broadly are high. Mexico remains the United States’ largest import: $534 billion in goods last year, or about 16% of the total. Canada ranks second with 382 billion dollars. Intra-regional trade across all three countries exceeded US$1.6 trillion in 2024, up from US$1 trillion when the USMCA took effect in 2020. U.S. and Mexican negotiators will meet again the week of July 20 to discuss rules of origin outside the auto sector; China is a driving factor in increasing content requirements. But for now, everything essentially remains in place. The USMCA will remain in effect until 2036 if none of the three countries withdraw, but any member can trigger a six-month opt-out provision. This seems clearly unlikely, given the extent of disruption the withdrawal would create for integrated North American manufacturing.

Information: This content was prepared and published using AutomobileMagazine’s artificial intelligence-supported publishing system, in line with the information shared by international automotive manufacturers and reliable press sources.