USMCA Faces a Tough Renegotiation

The United States, Mexico, and Canada Free Trade Agreement (USMCA) is set to be discussed next July for a 16-year renewal. However, with the Trump Administration in office, what should have been a straightforward, essentially ceremonial exercise is likely to become an intense wrangling over trade rules, tariffs and the future of North America’s three-decade-old three-way economic partnership. 

The USMCA Agreement, signed under the first Trump presidency in 2020, represented an updated version of the former North American Free Trade Agreement (NAFTA), signed under the Clinton Administration. The new law maintained tariff-free access to US markets for most manufactured products and expanded the US agricultural sector’s access to Mexican and Canadian markets. While it represented a disappointment for many more hardline advocates of economic isolationism, President Trump declared the agreement at the time to be “the best trade deal ever.” 

However, as the president doubled down on his “America First” agenda for his second term, he has attempted to extract greater concessions from both Mexico and Canada. To that end, he has invoked the International Emergency Economic Powers Act (IEPPA) to place tariffs on large amounts of Canadian and Mexican goods (many suspended pending review). US Trade Representative Jamison Greer threatened that the United States would only accept “deals that are a good deal.” Is the USMCA at risk of being scrapped altogether?

Probably not. Pressure from President Trump’s rural agricultural base will likely push him to renew the agreement, considering that the USMCA opened up massive new markets to US farmers that will likely be shut if the USMCA is lost. Already, soybean farmers are restless over tariffs due to Chinese retaliation on American soybean imports. But that doesn’t mean proponents of free trade should rejoice. The Brookings Institution points out that the 2026 trade renegotiations will likely be a platform for the US to vent its frustrations regarding migration, drug smuggling and perhaps even defense spending, on top of the usual imbroglio over duties on individual goods. These factors could create impasses in the signing of a comprehensive agreement. In addition, President Trump may demand a provision that makes it easier for the United States to selectively target individual products for duties, leveraging America’s dominant position in the agreement to secure economic benefits at the expense of its trade partners. Such a move may drive Canada and Mexico to seek commerce through other forums, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of which both are members, and the United States is not. Ultimately, if a new deal creates far too many loopholes that circumvent the spirit of free trade, the USMCA may be an agreement in name only, with no true enforceability.

This is not to say that the USMCA is destined for a slow fall into the abyss of irrelevance either. President Trump could yet change his mind about the amount of concessions he would be satisfied with extracting. It wouldn’t be the first time he has altered his positions on the fly. In addition, Trump’s presidency will end in 2028 (despite what Steve Bannon would like us to believe), and a future administration could very much revive the USMCA in its fullest form. While media attention has been focused squarely on the trade renegotiation next year, we must remember that the future of the deal is not solely contingent upon the outcome of these negotiations, whatever they may be.

Read more here:

• Diego Marroquín Bitar, Christopher Hernandez-Roy, and Earl Anthony Wayne, CSIS

• Ana Swanson, New York Times

• C.J. Mahoney, Brookings Institution

• Rachel Steely, Time Magazine

Extemp Question: What will be the future of the USMCA trade agreement in 2026?