Trump Declines to Renew USMCA: What's Behind the Decision?

The Trump administration declared on Wednesday that it will not renew the USMCA— the major trade agreement linking the United States, Mexico, and Canada— in its current form as the mandatory six-year review period approached.

This announcement was delivered through a brief 150-word statement from the Office of the United States Trade Representative (USTR), led by Jamieson Greer: "The U.S. has not agreed to renew the USMCA in its current form. Consequently, the USMCA will not be renewed."

Reasons Behind Trump's Decision

The primary reason behind Washington's refusal, which Trump has openly repeated, is his belief that the agreement favors its neighbors more than the United States.

"I'm not looking to renew it. We don't need anything from Canada. We don't need anything from Mexico, but they need everything we have. They have to treat us better," the president stated last month.

The underlying argument is the trade deficit: The United States had an imbalance of about $182 billion with Mexico in 2025, a figure the White House uses to demonstrate unfair treatment.

Implications of the Decision

This decision does not equate to canceling the treaty. The USMCA will remain in effect until 2036, its original 16-year term. However, instead of extending for another 16 years as Mexico and Canada requested, it will now undergo annual reviews.

Mexico's Secretary of Economy, Marcelo Ebrard, made it clear after the trilateral virtual meeting: "The United States is not in a position to extend it for another 16 years. We will proceed with the annual review track for the next 10 years, which is the duration of the treaty."

Ebrard also dismissed the idea that any of the three countries intend to withdraw from the agreement, emphasizing that any withdrawal requires a written notice six months in advance.

The Cost of Uncertainty

Even though the USMCA remains, the lack of certainty is already taking a toll. The Mexican automotive sector has lost 100,000 jobs since 2025 due to commercial instability.

In Canada, business investment has declined for five consecutive quarters, and hiring remains stagnant. The treaty accounts for approximately two trillion dollars in annual trade among the three countries.

Different Approaches with Mexico and Canada

Negotiations with the two neighbors are progressing differently. U.S. officials acknowledged that Mexico "has been very constructive" and has put forth specific proposals to reduce the deficit, while Canada faces more hurdles.

"Canada is in a different position. Alongside China, it was one of the few countries in the world that responded to the United States" with retaliatory tariffs, noted a senior official from the Department of Commerce.

Mexican President Claudia Sheinbaum defended the agreement's value: "The treaty benefits the United States by lowering product prices. As North America, the three countries together can better compete with other global regions."

Possibility of Terminating the Agreement

Technically, Trump could terminate the agreement, but significant obstacles exist. The Senate Finance Committee warned in 2020 that the United States cannot withdraw from a Congress-approved agreement without its consent, potentially leading to legal challenges.

Michael Pearce, chief U.S. economist at Oxford Economics, believes there is "only a small probability" that Trump will invoke the exit clause, considering "the prohibitively large costs this would impose on U.S. investment and trade, particularly in key swing states in the Midwest."

The next meeting is scheduled for the week of July 20 in Mexico City, where the third round of bilateral negotiations will take place. Ebrard summarized his government's stance: "We are not in a hurry, but we are also not interested in having uncertainties."