Mexico Enters New Phase: USMCA Continuity and Annual Review with the U.S. and Canada

Officials from Mexico, the United States and Canada, on July 1, 2026, held a trilateral joint review meeting of the United States-Mexico-Canada Agreement (USMCA), as provided for under the agreement six years after its entry into force. The meeting confirmed that, for the time being, there is no consensus among the three countries to automatically extend the agreement for an additional 16 years.

This outcome does not imply the termination of the USMCA, nor does it immediately modify the current trade rules. The agreement remains in force, and trade and investment operations among the three countries will continue to be governed by the existing legal framework. However, because no agreement was reached to extend it, a new phase of annual reviews will be triggered over the next 10 years, during which the parties will continue assessing the agreement's performance and potential areas for adjustment.

Although the USMCA is not ending, it is entering a period of heightened political uncertainty and recurring negotiation. For Mexico, the agreement will remain the primary framework for North American economic integration, but its future will increasingly depend on the three countries' ability to manage trade, industrial and geopolitical tensions.

The U.S. Position

The Office of the United States Trade Representative (USTR) stated that the U.S. did not agree to renew the USMCA in its current form. It also clarified that the agreement remains in force while outstanding issues are addressed or until a potential termination pursuant to the agreement's own provisions. The U.S. further confirmed that it will continue working with Mexico and Canada to address what it views as shortcomings in the USMCA, as well as its trade deficits with both countries.

At the same time, Washington is avoiding granting full, long-term certainty before reviewing issues it considers strategic. Areas likely to gain greater relevance include rules of origin, regional content, the automotive industry, steel and aluminum, labor compliance, agriculture, supply chains and rules addressing China's participation in the region.

For the U.S., the annual review process may serve as a tool to maintain pressure on its trading partners without terminating the agreement or immediately disrupting regional production integration. Politically, this approach allows Washington to project a firm trade stance while preserving the operational continuity of the USMCA.

Canada's Position

Canada adopted a clearly favorable position toward the continuity and renewal of the USMCA. Dominic LeBlanc, Canada's minister responsible for trade with the U.S., reiterated his country's support for the agreement and its renewal, noting that the USMCA supports millions of jobs across North America and provides Canadian businesses with secure and predictable access to their key trading partners.

The Canadian government also emphasized that the USMCA remains fully in force until 2036 and may be renewed at any time for an additional 16-year term. This clarification is important to reduce uncertainty, as the absence of an immediate extension does not prevent the parties from agreeing to renew the agreement in a subsequent review.

However, Canada's agenda extends beyond the review clause. It has also underscored the need to maintain substantive discussions with the U.S. regarding sectoral tariffs affecting Canadian steel, aluminum, automobiles and lumber. In this regard, Canada will seek to defend the trilateral framework while also using the review process to address specific bilateral disputes with Washington.

Mexico's Position

Mexico has sought to convey a message of stability, emphasizing that the USMCA is not ending, that it will not be modified in the short term and that regional trade will continue to operate normally. This position is grounded in the legal framework of the agreement itself: If the three parties do not agree to extend it for an additional 16 years, the agreement remains in force under its current term and enters a period of annual reviews over the next decade.

Mexico's Ministry of Economy has also stated that dialogue with the U.S. will continue. In particular, a new bilateral meeting is expected to take place during the week of July 20, 2026, in Mexico City, which will be relevant to identifying the issues that Washington will seek to prioritize in the next phase of negotiations. USTR also confirmed that it will hold a third round of bilateral negotiations with Mexico that week, linked to the USMCA joint review.

For Mexico, the main challenge will be to preserve certainty for investors and productive sectors while preventing the annual reviews from becoming a permanent renegotiation process. In other words, Mexico will seek to advance a narrative in which the agreement remains in force, while also acknowledging that the next stage will involve more intensive and politically sensitive negotiations.

Potential Negotiation Issues

Although the parties have not yet released a comprehensive public negotiating agenda, their official statements and communications provide insight into several issues that are likely to feature prominently in the upcoming discussions, as discussed below:

• Automotive Industry and Regional Content. The U.S. is expected to seek a review of compliance with rules of origin and regional content requirements, particularly in highly integrated sectors that remain subject to significant domestic political scrutiny.
• Steel, Aluminum and Industrial Sectors. Canada has explicitly identified U.S. sector-specific tariffs on steel, aluminum, automobiles and lumber as priorities for discussion. These issues could indirectly shape the broader USMCA review process.
• Supply Chains and China. The review may increasingly address concerns related to trade circumvention, the use of inputs from third countries, and the participation of Chinese companies in manufacturing and supply chains established in Mexico and across North America.
• Labor Mechanisms. Labor compliance will remain a key component of the trade relationship, particularly for Mexico, given the extensive use of the Rapid Response Labor Mechanism in recent years.
• Agriculture and Market Access. Agricultural products remain politically sensitive in all three countries. As a result, negotiations may include discussions on sanitary and phytosanitary measures, as well as market access conditions for agri-food products.
• Energy, Investment and Regulatory Certainty. Investors will continue to closely monitor issues related to investment protection, permitting processes, infrastructure, electricity, fuels and compliance with international commitments. However, this is not expected to dominate the initial public agenda.

Next Steps for Companies Operating in North America

Although the annual review does not amount to an automatic termination of the USMCA, the absence of consensus to extend it for an additional 16 years means that the parties must continue meeting annually over the next 10 years to assess the agreement's operation.

If the parties reach an agreement to extend the USMCA during this 10-year annual review period, the agreement would remain in force for another 16 years, restarting the joint review cycle provided for under the treaty.

Tariff preferences, rules of origin, trade disciplines, dispute settlement mechanisms, and labor and environmental commitments remain fully applicable. What changes is the level of political certainty: Instead of an immediate long-term extension, the agreement now enters a phase in which each annual review may become a forum for pressure, negotiation and conditionality.

This dynamic may affect long-term investment decisions, particularly in sectors that depend on integrated regional supply chains. For Mexican, U.S., Canadian and Latin American companies operating in North America, the key issue will be to monitor not only the current text of the agreement, but also the political priorities each country brings to the table.

In conclusion, the trilateral meeting can be understood as the formal start of a new phase for the USMCA. The agreement remains in force, but its long-term renewal will depend on annual negotiations over the next 10 years, the political evolution in the U.S., and the ability of Mexico and Canada to build a regional position that enables them to negotiate with Washington from a place of strength.

For additional information or questions, please contact the authors.

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