The United States–Mexico–Canada Agreement (USMCA), which replaced NAFTA in 2020, is heading for its formal review on July 1, 2026, which will determine whether the agreement, which according to the US Chamber of Commerce supports 13 million American jobs, will be renewed.
The United States–Mexico–Canada Agreement (USMCA), which replaced NAFTA in 2020, is a trilateral free trade agreement (FTA) that outlines rules for duty-free trade, and it requires the three countries to hold a joint review after six years. This formal review starts July 1, 2026.
When asked about the United States–Mexico–Canada Agreement (USMCA) in January, President Donald Trump said, “There’s no real advantage to it. It’s irrelevant.”
Synergy And Opportunity
In a statement for the US Senate hearing on USMCA, the US Chamber of Commerce points out, “More than 13 million American jobs depend on trade with Canada and Mexico. US manufacturers export more made-in-America manufactured goods to our North American neighbors than they do to the next 12 largest export markets combined, and the two countries account for one-third of US agricultural exports.”
The statement continues, “USMCA ensures US manufacturers, farmers, and service providers can continue to access the Canadian and Mexican markets. It guarantees that virtually all U.S. exports enter these markets tariff-free and helps American companies and the workers they employ compete in our top two export markets.”
The Chamber adds that the USMCA facilitates co-production in agriculture and manufacturing, especially the automotive, aerospace, medical goods, textiles and apparel, and forest products sectors. “These partnerships leverage complementarities between the three economies, creating efficiencies that help American companies produce high-quality products at a low cost.”
Blake Harden, Managing Director, Washington Council, Ernst & Young (EY) agrees, “Having all three economies working together creates much more synergy and opportunity. It creates a trading block that’s more competitive globally.”
Harden adds, “In the last eight years we have seen various supply chain disruptions — COVID, geopolitical, climate events — and consequently there has been a push for nearshoring. The idea of having the supply closer to home — and a diversified supply chain — makes the case for USMCA even stronger, when we think about the potential for disruptions to keep happening on a more frequent basis. So having this agreement with such resilience built in is important.”
High-Stakes Negotiation
The review will be taking place in an uncertain trading environment, with both Canada and Mexico facing unpredictable US tariff policies, making the negotiation that much more complex. Adding to the mix, Canada seems to be building a stronger economic relationship with China — signaled by a January 2026 agreement to expand bilateral trade, strengthen two-way investment, and deepen cooperation in multiple sectors including energy and agriculture — possibly with the intent to make Canada more independent from the US economy. President Trump threatened Canada with an immediate 100% tariff if they make a trade deal with China, although on February 11, the US House voted to rescind Trump’s current tariffs on Canadian goods.
Will these recent tensions between the US and Canadian administrations negatively impact the negotiations?
“I think we’ll have to wait and see,” Harden responds. “There are a lot of issues that US and Canada need to resolve. There are also issues that US and Mexico are working through. Some of those issues are within the scope of the USMCA, and others are outside the scope of the agreement. So, it’s going to be up to each country to navigate that.”
Jason Craig, Senior Director of Government Affairs at C.H. Robinson, adds, “We don’t expect the USMCA review to upend the basic spirit of the agreement. The review will likely feel more like a negotiation, and it may be very tense at times. But even as companies reshuffle their sourcing strategies and Mexico’s export mix is shifting rapidly toward electronics and machinery, North America continues to function as a tightly linked production ecosystem. Regardless of what new arrangement ends up being the result of this USMCA review process, manufacturing in North America is likely to remain beneficial.”
Subject to Review
“The whole purpose of the review is to assess whether the parties are holding up their end of the bargain, implementing the commitments they’ve made, and to decide whether the rules that were negotiated still make sense today,” says Harden of EY. “The US administration has been fairly transparent in identifying areas where it would like to see change. For example, addressing implementation and compliance challenges that the US might want to raise with Canada or Mexico.”
The experts also agree that rules of origin will be a primary topic of the review, to ensure visibility of the national source of products and components. This is of particular importance as countries like China may attempt to circumvent U.S. tariffs.
“The goal is to ensure that countries who are not party to the agreement aren’t benefiting in a way that the US, Mexico and Canada do not intend,” Harden notes.
Evan Giesemann, Senior Manager, Washington Council, EY, adds, “As all three parties think about making the agreement continually relevant, some of the points that are critical to the 21st century economy include cooperation on advanced technologies and critical minerals.”
Increase Clarity, Reduce Friction
“The USMCA would serve businesses best if this review is used to increase clarity and reduce frictions in the system, not create new ones,” Craig asserts, adding that C.H. Robinson hopes for two specific outcomes.
First, increasing efficiency and resources to facilitate smooth and safe trade across the border. Consistent application of rules across entry points, world class tech systems and connectivity, and reliable crossing times allow for improved capacity planning and increased efficiency.
“We expect freight volumes from Mexico to continue to increase because manufacturing continues to nearshore away from China and Southeast Asia,” Craig explains. “That means cross-border infrastructure will need to continue to improve to accommodate increasing volumes. But in general, every USMCA country needs to improve its infrastructure. The border process is only efficient as its weakest link. And while we all tend to think of supply chains as controlled by the private sector, the government’s role in enabling the safe and efficient movement of freight across borders is just as crucial.”
Second, Craig is looking for the USMCA review to address the rules for duty drawback. USMCA goods that cross the border multiple times and were ultimately bound for export were excluded from duty drawback, but since the application of tariffs has changed, this drawback eligibility should be re-examined.
“The most successful companies are using this moment, while tariffs have stabilized and before the review reaches its decision points, to solidify their strategies,” Craig concludes. “The current lull in tariff escalation, driven in large part by the US–China truce in place through late 2026, is giving them just enough breathing room to tighten their processes. For companies that use this review window to modernize their documentation, harden their supplier networks, and build optionality into their North American routing, the outcome of the USMCA review can be a manageable event rather than a disruption.”
