The US Government has decided this Wednesday not to extend the USMCA, or the T-MEC as it is known in Spanish, the major trade agreement with Canada and Mexico that was signed in 2020, during Donald Trump's first term. This was confirmed on Wednesday by the Department of Commerce in a brief statement, without bothering to give reasons. "The agreement requires the Free Trade Commission, composed of government representatives from each party, to conduct a joint review of the Agreement on July 1, 2026. The United States, Mexico, and Canada met virtually today to analyze the operation and the United States did not agree to renew it in its current form. Consequently, the T-MEC is not renewed," explained the department of Jamieson Greer.
The decision can hardly be considered a surprise, after the Trump administration punished its neighbors with tariffs as soon as it returned to power. The last year and a half has been a succession of reproaches, clashes, threats, punitive decisions, lifting of charges, and negotiations in the shadows. And Washington's decision practically means that this way of proceeding will become the norm for the next decade. Because Trump has decided not to extend it, which is not the same as withdrawing.
"The United States will continue to engage in dialogue with Mexico and Canada to address the Agreement's deficiencies and our trade deficits with these countries. However, the Agreement remains in effect until these issues are resolved or until its termination. The United States will meet with Mexico the week of July 20 for a third round of bilateral negotiations related to the joint review of the T-MEC," concludes the text published today.
The situation is a blow to businesses, industry, and the transportation sector, facing a long period of uncertainty. The US's refusal implies that the trade representatives of the three parties will have to meet annually over the next decade in a constant review process. In this way, they hope that Canada and Mexico will accept to consolidate much worse conditions, similar to how the EU has accepted unilateral tariffs to avoid a total breakdown, despite not having a comprehensive free trade agreement.
The T-MEC or USMCA came into effect on July 1, 2020, replacing NAFTA, which had been in effect since 1994. Negotiated during Trump's first term, the text maintained the elimination of most tariffs between the three countries but tightened rules of origin in sectors such as the automotive industry. It also included more stringent labor and environmental standards and updated all regulations covering digital trade and intellectual property. Washington aimed to protect the integration of North American supply chains and promote domestic production against competitors like China. However, decisions in the past year have caused significant chaos at the borders, especially in the automotive sector where components and parts typically cross back and forth across the continent before cars are completed.
The treaty has an initial duration of 16 years, until 2036, but included a six-year review clause, which has now been affected, through which any of the three partners could prevent it from automatically extending for another 16 years, until 2042.
The White House wants to leverage its position of strength to pressure and renegotiate the core issues, which go beyond tariffs. Trump, who relied on drug trafficking to impose charges on all exports, argues that the agreement has not reduced the US trade deficit or limited China's influence. Therefore, he wants to adjust aspects such as rules of origin in the automotive industry, access to certain agricultural markets, Mexican energy policies, and measures to prevent low-priced Asian products from entering as before.
Although legally the treaty remains in effect, companies inevitably have less certainty about the long-term trade framework, which could delay investments in sectors requiring long-term planning. It is also a major political issue for Canada and Mexico, who are most desperate for renewal despite being unilaterally punished since January of last year. They assume that threats will multiply and that the fight process will be ongoing.