The USMCA is a trade deal negotiated by Donald Trump during his first term to replace the similar, longstanding North American Free Trade Agreement (NAFTA). It shields most products traded between the United States, Mexico and Canada from tariffs. Without it, Trump would have freer rein to indulge his protectionist impulses. As of late 2025, both Mexico and Canada enjoy an estimated overall tariff rate of less than 10%, according to Capital Economics, a London-based consultancy—well below the global average of 17%.
Diego Marroquín Bitar of the Centre for Strategic and International Studies, a think-tank in Washington, reckons trade between the USMCA's three parties grew by 32% between 2019 and 2024 to reach $2trn a year in nominal terms. Annual foreign direct investment from the rest of the world into North America grew by 21% over that period, bucking a global decline.
Over 80% of Mexico's exports go north, equivalent to about a third of GDP. Canada sends three-quarters of its exports south, including oil, wood, car parts and aluminium. A fifth of American exports go to Mexico and Canada.
The USMCA's first formal review is due to start on July 1st 2026. On January 13th 2026 Donald Trump called the agreement "irrelevant". On September 16th 2025 Mexico and the United States launched consultations ahead of it. Lila Abed of the Inter-American Dialogue, a think-tank in Washington, calls the review "the biggest leverage point for the United States". Most observers expect the agreement to be renewed in some form for 16 years, the term of the first agreement.
Nearly half of America's imports have been exempted from Trump's tariffs. Canada's headline tariff of 35% is nearer 6% in practice, according to Scotiabank, largely because goods qualifying under the USMCA are exempt. The share of Canadian exports deemed USMCA-compliant has jumped, suggesting significant relabelling. The Budget Lab at Yale estimates that America's implied tariff rate, derived from customs data, is roughly half what it should be given current policy.
Jamieson Greer, the US trade representative, arrived in Mexico for talks on April 20th 2026, making clear a straightforward extension is unlikely. The United States wants tighter rules of origin for cars (chiefly to exclude Chinese parts), greater access to Canada's dairy market, and retention of existing tariffs on steel, aluminium and cars even for goods that fall within the agreement. It also demands greater co-operation on migration, security and competition with China. With America's GDP seven times bigger than Canada's and Mexico's combined, it is in a strong position. The United States is reportedly demanding upfront concessions from Canada before starting formal talks.
Michael Camuñez, a commerce official in the Obama administration, says the deal is "on life support". A likely outcome is that the trio will agree to review the deal annually, while the United States uses other tools—tariffs justified on national-security grounds, forced-labour investigations and regulatory pressure—to extract concessions, according to Diego Marroquín of the Centre for Strategic and International Studies. The trio must decide by July 1st 2026 whether to extend the USMCA beyond its 2036 expiry date.
Behind closed doors, Trump aides have warned that America may seek separate trade deals with Canada and Mexico, reviewed each year—a structure that would give America's greater clout the advantage at each revision. Members of Congress from both parties have told Canadian business leaders they support the USMCA but are unwilling to stand up to Trump, who takes all big decisions.
Trump has imposed tariffs on some items covered by the USMCA, including cars, steel and aluminium, justified on national-security grounds—which the USMCA allows. When the USMCA was agreed in 2018, the United States gave Canada and Mexico an annual quota of duty-free imports of cars and car parts that could be invoked whenever tariffs are applied on national-security grounds. That quota includes some 2.6m passenger vehicles from each of Mexico and Canada, as well as car parts worth many tens of billions. The quota has been ignored by the United States. Instead, a 25% tariff on non-American content in finished vehicles is in force.
The United States has several investigations running which might lead to national-security tariffs being applied to more products, like semiconductors and medical devices, further bypassing USMCA protection. By some estimates, up to a third of all USMCA trade is now affected. Mexican beer, for example, is covered by the USMCA, but exporters must pay Trump's national-security tariff on the aluminium in the can.
On September 18th 2025 Mark Carney, Canada's prime minister, made his first official trip to Mexico and met Claudia Sheinbaum, Mexico's president. The pair promised to "strengthen" the USMCA. Canada has been openly critical of Trump's tariffs; Mexico has embraced American demands and worked to build a relationship with the Trump administration.
Reliance on Chinese supply chains is a point of contention. The United States frets about the activity of Chinese firms in Mexico. Chinese cars accounted for 20% of new cars sold in Mexico in 2024, up from under 1% in 2017. In September 2025 Mexico imposed tariffs of 20–50% on 1,463 products from countries with which it has no free-trade deal, including a 50% tariff on Chinese cars. Mexico has also drawn up a screening mechanism for foreign direct investment and passed it to American officials to review.
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