By Jennifer Lee and Jackson Mariani

February 2, 2026

The July 1 deadline to decide on the renewal of the USMCA/CUSMA is fast approaching amid stalled negotiations, President Donald Trump’s pre-emptive dismissal of the deal’s value to the U.S., and heightened U.S.-Canada tensions fueling doubts about its fate.

Even if the deal is extended for another 16-year term, amendments are expected; United States Trade Representative (USTR) Jamieson Greer recommends renewal only if the issues Washington has articulated are resolved.

The USMCA is critical for the U.S., Canadian, and Mexican economies and failure to renew it would have significant implications. Trilateral trade (goods and services) reached over $1.9 trillion in 2024; the USMCA market covers 30% of global GDP.

Growth in North American trade saw Mexico surpass China as the top U.S. trade partner in 2023, a position Mexico has held since.

The USMCA’s failure would also remove Canada and Mexico’s protections against U.S. tariffs: over 90% of Canadian exports to the U.S. and an estimated 84% of Mexican exports to the U.S. are currently exempted from U.S. tariffs of 35% and 25%, respectively, under the USMCA.

A Bumpy Road

Although Congress had hoped for a written report by Jan. 2, USTR Greer insists that his Dec. 16-17 briefing before the House Ways and Means Committee and the Senate Finance Committee fulfills the USTR’s required assessment of the USMCA.

Meanwhile, U.S.-Canada talks on the trilateral deal were expected to begin mid-January, but tensions between President Trump and Canadian Prime Minister Mark Carney — ostensibly over the latter’s speech at Davos and his narrow EVs-for-Ag deal with China — may have pushed back the talks.

The exception is Mexico, which has continued to send Economy Minister Marcelo Ebrard and trade delegations to negotiate its interest in USMCA preservation. Following Ebrard’s Jan. 28 meeting with Greer, the USTR statement affirmed that “they agreed to begin formal discussions on possible structural and strategic reforms in the context of the first USMCA Joint Review,” though no timeline was given.

Benchmarks and Hot Spots

The governments are supposed to submit recommended changes to the agreement for the Free Trade Commission to consider at the joint review by June 1. Issues identified over the past six years that the parties would like to remedy include:

• Rules of Origin/Labor: In an effort to boost U.S. manufacturing and reduce Chinese goods entering North America, Washington has been pushing for increased requirements for regional content in goods. Similarly, it also seeks better enforcement of existing forced labor provisions in the USMCA, also aimed at hampering Chinese goods from flowing into the U.S. via Mexico (and Canada to a lesser extent). Enforcement of minimum wage requirements is also on Washington’s agenda.
• Agriculture: The U.S. wants better access to the Canadian market for its agricultural goods, namely dairy and liquor, as well as access to Mexico for its corn. It has also taken issue with the influx of seasonal produce from Mexico competing with the U.S. domestic farming industry.
• Energy: Both Ottawa and Washington have launched complaints over Mexico’s discrimination against foreign energy companies and investors in favor of state-owned enterprises. Greer has also alleged discrimination against Montana electricity producers by the Alberta grid operator.
• Digital/Tech: Two 2023 Canadian laws have fueled tech tensions between the U.S. and Canada: the Online Streaming Act and the Online News Act, both of which Washington argues discriminate against and burden U.S. Big Tech. Meanwhile, Canada and Mexico may press the U.S. on cross-border data flows and other security and privacy concerns with digital trade and the growing role of AI.
• Critical Minerals: The Trump administration’s preoccupation with critical minerals has seen Treasury Secretary Bessent (Jan. 12) and Secretary of State Rubio (Feb. 4) convene international partners to discuss critical mineral and rare earth supply chains. The administration has negotiated a number of bilateral deals (e.g., Japan, Ukraine, the DRC, Thailand, and more) focused on critical minerals and may add a critical minerals provision to USCMA negotiations. A critical minerals provision could protect Canadian and Mexican mineral exports from U.S. tariffs and promote joint production and recycling – especially given China’s dominance in processing. (Note that the 2020 S.-Canada Joint Action Plan on Critical Minerals is still in effect, and the G7 also launched a Critical Minerals Action Plan last year.) When Ebrard met Greer Jan. 28, their discussion included a focus on “enhanced collaboration on critical minerals.”

Possible Joint Review Outcomes

There are three possible actions the USMCA parties could take at the joint review: extend the agreement for a full 16-year term, kick the can down the road another year, or withdraw from the agreement.

• Full-Term Extension: According to Article 34.7, if all three parties agree, the deal (with amendments) would be extended 16-years to 2042. There would be another 6-year joint review in 2032.
• Delay: If any of the parties does not agree to full-term extension, the agreement continues through its current 16-year term (to 2036) with a joint review every year. The disagreeing party or parties can decide to move forward with full-term extension at any point.
• Withdraw: Even outside of a joint review, any of the parties may decide to withdraw from the agreement as stated in Article 34.6. Withdrawal is effective six months from the withdrawal declaration. One party’s decision to withdraw does not negate the agreement for the remaining parties; the agreement stays in effect for the parties that did not withdraw.

Leadership as a Factor

Donald Trump, Mark Carney, and Mexican President Claudia Sheinbaum have adopted markedly different approaches to the ongoing negotiations. Their public statements and actions on trade and other policies offer some signals into their countries’ strategic aims and their stances on the ongoing negotiations.

Trump: Concentrated Control, Driver of Uncertainty

“There’s no real advantage to it; it’s irrelevant,” said Trump of the USMCA during a Jan. 13 visit to a Ford auto factory in Dearborn, Michigan. “We don’t need cars made in Canada. We don’t need cars made in Mexico,” he continued. Taken alone, Trump’s comments suggest that — at least in his opinion — the U.S. would be best served by withdrawing from the USMCA (which he negotiated in his first term to replace NAFTA). Yet, despite his typically hardline rhetoric, Trump has not pulled that lever – a bluff expressly called out by Carney. Still, Trump is arguably the biggest deciding factor in the fate of the USMCA. Not only is the U.S. the largest economy of the three, Trump has also concentrated decision making power, removing the credibility and agency of his senior officials to make policy decisions. It is unclear if Congressional authority would be required to withdraw from the USMCA, but it is unlikely the 119^th Congress would try to stop withdrawal.

His track record of flip-flopping on major issues and conflating trade goals with non-trade policy areas like mitigating immigration, countering drug trafficking, and limiting China’s presence in the region, will continue to inject uncertainty into negotiations leading up to July 1.

Carney: Strengthening Canada on the Global Stage

Carney remarked on Jan. 26 that “President (Trump) is a strong negotiator, and ‍I think some of these comments and positioning should be viewed in the broader context of that.” Chalking up the president’s statements to bargaining tactics, Carney added he expects a “robust review” of the USMCA, and a Canadian Chamber of Commerce official asserted that diversifying ties (in reference to the narrow deal with China) does not replace Canada’s “deeply rooted relationship with the United States that continues to be overwhelmingly good for workers, consumers and North American competitiveness.” Yet, Carney recently stepped up his rhetoric with regard to Trump’s foreign and trade policies. Carney used parts of his Jan. 20 Davos address to note the shift in the global world order and the newfound importance of “middle powers.” In doing so, he sought to elevate Canada in USMCA negotiations, highlighting that “Canada has what the world wants. We are an energy superpower. We hold vast reserves of critical minerals. We have the most educated population in the world. Our pension funds are amongst the world’s largest and most sophisticated investors. In other words, we have capital, talent…” He noted Canada and other middle powers are diversifying and recalibrating their relationships to manage risk in a shifting global landscape. In his call with Trump on Jan. 26, he said Canada was prepared to “respond positively” and to build a new U.S.-Canada relationship “through the USMCA.”

Sheinbaum: Calm and Collected

Sheinbaum has avoided entry into Trump and Carney’s arena of rhetorical posturing. On Jan. 22, she told reporters that the agreement remains “convenient” for all parties and that “we’re going to work so that it doesn’t fall apart,” distancing Mexico from the ongoing U.S.-Canada rift. She has continued taking pragmatic steps towards the review, sending Ebrard to Washington for the meeting with Greer and maintaining cordial ties with Trump. Sheinbaum’s preference for action over words expresses her confidence in the ability of disciplined negation to produce an updated agreement that benefits all three parties.

The Road to July

As formal negotiations begin ahead of the July 1 deadline, the cumulative narrative set by Trump, Carney, and Sheinbaum is far from one of hopelessness. In their exchanges, Trump and Carney have shown that — while clear room for substantive gains exists for both parties — the status quo is, thus far, mutually preferable to full termination, also supported by Trump’s walking back of his 100% tariff threat against Canada. Both Canada and the U.S. have elections this year, so both leaders are eager to see their biggest headaches with the agreement resolved.

With over 17 million North American jobs underpinned by USMCA exports, intra-regional trade growing by 50% under the USMCA, and Mexico and Canada becoming increasingly important trade and investment partners for the U.S., there are economic (and political) incentives to move forward with an amended USMCA.

Notwithstanding Trump’s preference for bilateral deals, his sliding approval ratings and the nearly 75% of Republicans who view the USMCA as good for the U.S. economy make a case for America staying in the deal.

Jennifer Lee is a Senior Associate at The Scowcroft Group, where she provides analysis to corporate clients and financial institutions covering East Asia, Latin America, resources and the energy transition, as well as export controls.

Jackson Mariani is a Research Intern at The Scowcroft Group, where he focuses on Latin America and global trade. Jackson holds a bachelor’s degree in international affairs from New York University and is currently pursuing a master’s degree at Georgetown University’s Security Studies Program.