Since USMCA took effect in 2020, trade between Canada, Mexico, and the United States has grown by 37%. But in July 2026, the agreement hit a critical juncture when the U.S. declined to extend it for another 16 years.

Now, with annual reviews replacing a long-term renewal, tariffs announced, and each country pursuing its own strategy, the future of North American trade is uncertain. This article examines the timeline, the positions of each country, and the key friction points shaping the negotiations.

On July 1, 2026, the agreement between Mexico, the United States, and Canada (USMCA) reached a crossroads. In its first joint review, the pact that modernized NAFTA and has governed North American trade for six years faced its most critical moment. While Mexico and Canada sought to extend the agreement for another 16 years, the United States said “no” and opted for a path that begins a decade of annual reviews and a renegotiation that promises to be tense.

This decision has opened a period of uncertainty that redefines the rules of the game for one of the most economically integrated regions in the world. 

What Does the U.S. “No” Mean?

The U.S. decision does not cancel USMCA. The agreement remains in full force until 2036. However, with no consensus for the extension, a new process is activated:

• Annual Reviews: The pact enters a cycle of annual reviews until 2036. Each year, the three countries will sit down to evaluate its performance and could, at any time, agree on a new 16-year extension.

• Bilateral Negotiations: To address the changes Washington seeks, the Trump administration has opted to negotiate separately with Mexico and Canada.

What is the USMCA Joint Review?

USMCA is not a perpetual treaty. Its Article 34.7 establishes a mandatory joint review on the sixth anniversary of its entry into force. This review is not an expiration date, but rather a scheduled “check-in”.

The objective is for the three countries to evaluate the agreement’s performance and decide whether to extend it for another 16 years. It is an opportunity to adapt it to a changing world, addressing topics such as digital trade, artificial intelligence, or energy stability.  However, this year, this clause became a diplomatic battleground.

USMCA 2026: How the U.S., Canada, and Mexico Stance on Trade Differs

The United States: “We’d Rather Be Independent”

The Trump administration’s stance is clear and forceful. President Donald Trump summed it up in a Fox News interview: “I don’t care. I mean, I really don’t want to. I’d rather be independent. Mexico and Canada need us. We don’t need them”.

The U.S. position is based on concerns about the trade deficit. According to U.S. Trade Representative Jamieson Greer, the U.S. goods trade deficit is a primary focus for the administration [9][14]. Greer stated: “The primary issue that the president’s been focused on with the world and particularly with Canada and Mexico is our trade deficit.” He further noted: “We believe that the USMCA did not operate to control the deficit like the president intended, so that’s really the heart of it”.

Following the July 1 joint review, Greer issued a statement: “The United States did not agree to renew the USMCA in its current form. 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 U.S. positions include:

1. Automotive Content: A proposal that 50% of the value of vehicles manufactured in North America originate in the United States. Mexico has indicated this demand is unacceptable.

2. Deficit Reduction: Requests for concessions to address the trade balance, particularly in sectors such as steel, aluminum, and automotive.

3. Tariffs: The administration announced 50% tariffs on a range of Canadian products (wine, cement, hockey sticks) effective August 19, 2026, citing what it called “unequal treatment” of U.S. products by Canada.
   

Canada: “Everything Is on the Table”

Canada formally requested the 16-year extension. Prime Minister Mark Carney has stated that “everything is on the table” in terms of how Canada will respond to tariff threats, including the possibility of retaliation [3][10].

Following the announcement of new U.S. tariffs, Carney stated: “We are going to support Canadian workers, families, businesses, full stop”. He also said his government will do “whatever it takes to defend and support our families, our workers and our businesses” and did not rule out retaliation if an agreement is not reachable  Carney noted that since the tariff war broke out, Canadians have “stood together” by buying home-produced goods and agreeing new trade routes with other countries, adding “country is stronger, stronger because we are united, and we will remain united”.

Regarding the trade talks with Washington, Carney said they are intensifying ahead of August 19, when the new U.S. tariffs will come into effect. He stated: “There’s a full range of things we can do in that regard” regarding potential punitive measures.

Canada-U.S. Trade Minister Dominic LeBlanc said in a statement following the July 1 review: “For Canada, this includes substantive discussions with the United States on addressing sectoral tariffs on Canadian steel, aluminum, autos and lumber”. Following comments from U.S. Trade Representative Greer, a spokesperson for LeBlanc stated: “Canada is willing to work expeditiously to achieve a successful renewal of CUSMA and provide certainty and predictability to our workers and businesses”.

The Canadian government has faced criticism domestically regarding its approach. Conservative critic Shuvaloy Majumdar stated: “We’ve had a year and a half of (Prime Minister) Mark Carney’s wait-and-see approach, which has not produced a single deal. We haven’t seen the intensity that a government that is focused on its interests should be bringing to our own North American contact”.

Foreign Minister Anita Anand, speaking alongside Mexico’s Foreign Secretary in Ottawa, noted that it is “difficult to compare” how bilateral talks with the U.S. are progressing because both Canada and Mexico are discussing different issues with the Americans.

Canada’s position includes:

• Defense of the Trilateral Agreement: A preference for maintaining the trilateral structure of the pact.

• Direct Negotiation: A request for formal negotiations with the U.S., which have not yet been scheduled.

• Public Opinion: An Angus Reid poll showed that 62% of Canadians support retaliatory tariffs. According to the survey, only seven percent of Canadians said Canada should “capitulate to U.S. demands” to avoid tariffs. Additionally, 75% of Canadians do not think Trump will stick to any deal.

Mexico: “The Trilateral Structure Must Continue”

Mexico, like Canada, requested the treaty’s extension. However, its strategy has been different. While Canada has had limited access to the negotiating table, Mexico has already held several formal bilateral rounds with the U.S. and is further along in the conversations.

Mexico’s Secretary of Foreign Affairs, Roberto Velasco Álvarez, stated that Mexico will not seek a separate agreement that excludes Canada. “It is a trilateral agreement and, of course, the three countries agree that this structure must continue,” he stated during a joint press conference with Canadian Foreign Minister Anita Anand in Ottawa. He added: “Each of us has bilateral issues. Each tries to resolve its bilateral issues in its own way”.

President Claudia Sheinbaum stated just before the July 1 deadline that Mexico has formed a common front with Canada during trade negotiations: “We have strengthened our relationship with Canada, there are Canadian business investments in Mexico”. Following the U.S. decision not to extend the agreement, Sheinbaum downplayed the significance of the deadline, saying the three countries could agree to an extension at any time over the next decade: “The joint work continues — it’s not as if everything ends today. If in five months or three years the parties say, ‘We can extend it for another 16 years,’ it can be extended”.

The USTR has noted that Mexico is further along in trade discussions. Jamieson Greer stated that formal trade talks with Mexico were progressing, while discussions with Canada had not yet generated the concessions the Trump administration seeks.

Mexico’s position is pragmatic:

• Advanced Negotiations: They have shown willingness to dialogue and have made concessions on issues like border security and fentanyl combat.

• No Retaliation: Unlike Canada, Mexico has opted not to directly retaliate against U.S. tariffs, which has been praised by the USTR.

• Common Front with Canada: Although they negotiate separately, they have reaffirmed their commitment to Canada on issues of investment and transnational crime. Anand announced $12 million in Canadian funding for shared priorities with Mexico, including combatting transnational crime.

Main Trade Friction Points

Several issues are under discussion:

1. Automotive Rules of Origin: The U.S. proposal for 50% American content is under discussion, with Mexico indicating reservations.

2. Sectoral Tariffs: The U.S. maintains tariffs on steel, aluminum, and automobiles for its USMCA partners and has announced additional tariffs on Canadian products.

3. Dairy and Alcohol: The U.S. has raised concerns about Canada’s supply management system for dairy and provincial policies on U.S. alcohol.

4. Digital Services Tax and Streaming: In his July 1 comments, Greer argued that Canada’s reversal on two trade friction points—the digital services tax and a separate tax increase on online streaming services—had not made a difference in negotiations: “I’m glad they did it, but they don’t really get credit for doing something wrong and then reversing it”.

Analysis of Economic Impact

According to a report from the Canadian Chamber of Commerce’s Business Data Lab released in July 2026, the renewed tariff threats have created uneasiness for Canadian businesses. Patrick Gill, Vice-President of the Business Data Lab, stated: “Holding back on business investments today, whether it’s investing in machinery, equipment, (research and development), or people, means delayed in future growth, in wages and productivity later on. With all this uncertainty, it’s really starting to affect our long-term competitiveness”.

The report suggests that the biggest economic cost may not be the tariffs themselves, but the investment that has been halted [4].

Looking Ahead

USMCA remains in force until 2036. The U.S. decision not to extend the agreement and the resulting process of annual reviews has created an environment of uncertainty.

U.S. Trade Representative Jamieson Greer told U.S. lawmakers that he hopes to have interim deals with Canada and Mexico ready to be considered before the end of 2026. However, he conceded that tougher issues, such as U.S. objectives for stronger automotive rules of origin and labor and environmental standards, could extend into 2027.

Neither LeBlanc nor Greer has indicated when negotiating teams from Canada and the U.S. will meet next. Tariffs scheduled to take effect on August 19, 2026, represent a near-term development in the ongoing discussions. The process of annual reviews and potential renegotiations will continue through 2036.