The United States declined to renew the United States-Mexico-Canada Agreement (USMCA) at the mandatory six-year joint review. Despite this announcement, the agreement remains fully in force, potentially through 2036, unless a party formally withdraws on six months' notice. Companies should expect near-term continuity, but USMCA will now be subject to annual reviews unless and until the parties agree to extend it.
The United States and Canada have yet to engage in formal negotiations, while discussions between the United States and Mexico are underway. Those negotiations have focused primarily on rules of origin, automotive and steel content requirements, regional value content thresholds, and measures to keep Chinese inputs out of North American supply chains. Meanwhile, Congress is also considering legislation that could alter the applicability of certain USMCA provisions. Companies with integrated North American supply chains should thus monitor the renegotiation and domestic action, as well as evaluate associated risks.
The Joint Review and Short-Term Takeaways: USMCA Remains in Place
On July 1, 2026, the United States, Mexico, and Canada met virtually for the mandatory six-year joint review of USMCA required under Article 34.7 of the agreement. U.S. Trade Representative Jamieson Greer confirmed that the United States did not agree to renew USMCA in its current form. However, non-renewal is not termination. Under Article 34.7, a failure to agree to a 16-year extension triggers a cycle of annual reviews. USMCA remains fully in force unless and until it is terminated or a party formally withdraws.
For companies with integrated North American supply chains, this means near-term continuity. However, key risks could emerge from the potential results of renegotiation. Supply chains that comply under current standards may no longer qualify if the parties adopt more restrictive rules. Companies should evaluate their compliance programs, identify risks that could be exacerbated by increased regional content requirements or altered rules of origin, and develop plans to mitigate those risks or adjust supply chains as needed.
Renegotiation in Lieu of Renewal: A Focus on Automotive Content
Although the agreement remains in force, the substance of the review is already underway, and the automotive sector sits at the center. The first two bilateral U.S.-Mexico rounds, which took place on May 28 – 29 and June 16 – 17, 2026, advanced discussions on rules of origin, economic security, steel, aluminum, and autos. The third round of negotiations is set for July 20.
We address the principal automotive proposals on the table in detail in our July 15, 2026, alert entitled "Automotive Trade Risks Escalate as USMCA Review, Section 232 Tariffs, and AD/CVD Actions Converge."
Beyond autos, renegotiation is likely to touch on the following issues:
- Investment screening: The United States is expected to push Canada and Mexico to adopt formal foreign-investment screening frameworks to curb Chinese circumvention, along with Uyghur Forced Labor Prevention Act-equivalent forced-labor prohibitions and restrictions on Chinese connected-vehicle software and hardware.
- Agriculture: The United States is expected to address genetically modified organism (GMO) corn and biotechnology commitments, Mexico's grain reinspection practices, and Canada's dairy tariff-rate-quota allocations.
- Other issues: Additional topics may include digital trade, energy-sector market access and Mexican state-owned-enterprise concerns, a new critical-minerals framework, expansion of the labor Rapid Response Mechanism, and stronger dispute-settlement and compliance rules.
Domestic Action: Congress Also Looks to Alter USMCA
In addition to changes that may result from formal renegotiation, domestic legislation could also reshape how USMCA affects North American supply chains. For example, Senators Katie Britt and Tim Scott have introduced the Foreign-Trade Zone Export Enhancement Act of 2026. This bill would address USMCA-related restrictions on duty-deferral programs by allowing goods produced in U.S. foreign-trade zones to be exported duty-free to Canada and Mexico.
Under current USMCA rules, U.S. manufacturers operating in foreign-trade zones generally must pay duties on certain non-originating inputs used in goods exported to Canada or Mexico. If enacted, the legislation could reduce that cost disadvantage and create new planning opportunities for importers, manufacturers, and exporters that use bonded warehouses, foreign-trade zones, or similar duty-deferral programs.
This development underscores that companies should monitor not only negotiations among the party nations, but also domestic legislative and regulatory activity that could affect USMCA compliance and supply-chain planning.
How Companies Should Approach the Shifting Landscape
The breadth of issues likely to be addressed in the annual review process and domestic legislation illustrate that USMCA's long-term trajectory remains uncertain. At the same time, companies should not mistake the United States' decision not to renew USMCA in its current form for immediate disruption. The agreement remains in effect unless and until it is terminated or a party formally withdraws.
The United States is expected to press aggressively for changes affecting rules of origin, regional content, supply-chain security, and sector-specific market access. Companies affected by these issues should monitor the negotiations closely, assess whether current sourcing and compliance strategies would remain viable under more restrictive rules, and consider engaging with policymakers where appropriate.
Baker Donelson's International Trade and National Security Team will continue to monitor developments and provide updates as warranted. If you have any questions or would like to discuss this in further detail, please reach out to P. Lee Smith, Matthew McGee, or any member of the International Trade and National Security Team.