Trump Administration Declines to Renew USMCA Beyond 2036; Opts for Annual Review Instead

As anticipated, the United States officially opted not to proceed with the renewal of the US-Mexico-Canada Agreement (USMCA) on July 1 after a series of virtual discussions involving officials from each of the three countries. Although President Trump had described the USMCA (which replaced the North American Free Trade Agreement (NAFTA)) as “the most important trade deal ever made by the US” at the time he signed it six years ago, a US Trade Representative official stated that the President chose not to “rubber stamp a USMCA renewal without addressing substantial existing issues”. 

The announcement does not end the USMCA immediately; rather, the Agreement will continue until 2036 and all current rights and obligations remain in effect.  However, the decision automatically activates a scheduled annual review framework within the USMCA that may extend until 2036 or until all the parties agree to a renewal. 

I. Background

The USMCA replaced the 26-year-old NAFTA in 2020, modernizing the regional trade framework with updated rules of origin and market‑access provisions. The United States exchanges an enormous volume of commerce with Canada and Mexico, about $1.9 trillion each year, or roughly $5 billion every day. Under the USMCA, qualifying goods from Mexico and Canada, which are the United States’ top trading partners, continue to receive the preferential treatment initiated by NAFTA, including exemption from a wide range of tariffs, provided they now meet certain rules of origin (ROO) and content requirements. 

As a result of NAFTA and its successor, North American businesses, especially agricultural and automotive, have developed intricate supply chains that often cross borders multiple times before the end product reaches its intended market. President Trump’s first term trade war with China had the effect of strengthening these supply chains.

Since beginning his second term in 2025, President Trump has aggressively used tariffs to address trade imbalances and other geopolitical concerns, while adopting a more adversarial approach toward the leadership of both Mexico and Canada. Shortly after his inauguration, despite the USMCA, he imposed his first International Emergency Economic Powers Act (IEEPA) tariffs on Mexico, Canada, and China. He has also been candid about his current dissatisfaction with the USMCA, calling it “irrelevant” and telling reporters after the refusal to renew that he would prefer to see the agreement terminated.

The refusal by the US to renew the trade pact beyond 2036 now forces annual reviews until then, creating ongoing uncertainty for North American trade and the affected businesses. The US is currently negotiating separately with Canada and Mexico, and there is speculation that the US would prefer separate, bilateral agreements with each. Discussions between Mexico and the US are more advanced than those between the US and Canada.

Key Pressure Points in the Review

Across both formal negotiations and informal discussions, US officials have emphasized tightening origin and content requirements for goods seeking preferential treatment. The administration has proposed increasing the North American content requirement for automotive products from 75% to 82% in negotiations with Mexico, with 50% of that content required to be sourced from the United States. Importantly, the proposal excludes Canadian inputs from being counted toward the North American total, which could pose challenges for highly integrated automotive supply chains.

Additional proposals include raising the regional value content for heavy trucks from 70% to 75%. In addition, the high‑wage content requirement would increase from 40% for core parts like engines, transmissions, and electric vehicle (EV) batteries, and 45% for pickup trucks.

II. Next Steps

The United States and Mexico launched Joint Review discussions in late May, holding an initial round from May 28-29, followed by a second round from June 15–17 in Washington. The next milestone is the third round of US-Mexico bilateral negotiations, scheduled for July 20, 2026, in Mexico City, where both governments will continue working through proposed revisions to the Agreement. No negotiations have yet been scheduled with Canada.

Any party may withdraw from the USMCA at any time, upon giving six months' notice.

III. Conclusion

The required annual reviews and the possibility of separate bilateral agreements are expected to maintain or increase uncertainty about rules of origin, specific content requirements, wage requirements, steel and aluminum, quotas, and Chinese involvement. Automotive, metals, agriculture, and consumer‑facing sectors all face higher compliance burdens and potential cost increases should content rules tighten, sourcing flexibility narrow and tariffs increase.

Butzel attorneys have extensive experience advising companies on the evolving USMCA landscape. This includes insights into the evolving negotiation process, analysis of supply chain exposure, and strategic preparation for potential changes to the trade agreement. The firm is available to assist organizations in navigating these issues and positioning themselves for compliance and continuity as the framework continues to shift.

Please contact your regular Butzel attorney or any member of the firm’s International Trade and Customs Specialty Team for further guidance.

Catherine M. Karol
313.225.5308
karol@butzel.com

Jennifer M. Smith-Veluz
202.454.2885
smithveluz@butzel.com

Mitchell Zajac
313.225.7059
zajac@butzel.com