DEST:OUSDNM

The U.S. administration is expected to formally declare on Wednesday that it will not extend the U.S.-Mexico-Canada Agreement (USMCA), a move that triggers a 10-year countdown toward the potential expiration of the North American free trade zone. According to reports, this decision initiates a six-year review process established under the agreement’s “sunset clause,” leaving the future of the trade framework in limbo as officials from the three nations continue to negotiate over regional content requirements and trade protections.

Why the U.S. is signaling a shift

While the USMCA was launched in 2020 as a replacement for the 1994 North American Free Trade Agreement, President Donald Trump has increasingly expressed dissatisfaction with the pact. Although he initially hailed the deal as “the fairest, most balanced, and beneficial trade agreement we have ever signed into law,” his stance shifted as the U.S. goods trade deficit with Mexico grew. According to the President, he favors the use of steep tariffs on Mexican and Canadian steel, aluminum, and automobiles over the current structure of the agreement.

Did You Know? The USMCA contains a “sunset clause” that mandates a review of the agreement, with the pact set to expire on July 1, 2036, if the three nations fail to agree on an extension.

Status of current negotiations

Trade officials from the U.S., Mexico, and Canada are scheduled to meet virtually on Wednesday to discuss the pact’s extension. However, the U.S. is currently pursuing a bifurcated strategy, holding formal negotiations exclusively with Mexico. U.S. Trade Representative Jamieson Greer has scheduled a third round of talks with Mexican officials for the week of July 20, while no formal schedule has been set for negotiations with Canada.

Expert Insight: The decision to bypass formal talks with Canada while maintaining pressure on Mexico suggests a shift toward addressing specific bilateral “irritants,” such as Canada’s dairy market restrictions, while simultaneously pursuing aggressive regional content demands. The U.S. objective of requiring 50% U.S.-specific content in vehicles—which would push total regional content to 82%—highlights a strategy to prioritize domestic manufacturing.

What happens next

If the U.S. confirms on Wednesday that it will not extend the agreement, the three nations will enter an annual review cycle for the next decade. Greta Peisch, a former USTR general counsel, noted that it remains unclear whether the U.S. will explicitly state its specific demands in a public manner following the meeting. Failure to reach a consensus on revisions by the end of the 10-year window would result in the expiration of the trade pact. This process is distinct from a separate termination clause, which would allow the U.S. President or his Mexican and Canadian counterparts to trigger a withdrawal from the agreement with six months’ notice.

Frequently Asked Questions

What is the “sunset clause”?
It is a provision negotiated during the first Trump administration that mandates a review of the USMCA. If the countries do not agree to extend the pact, it faces expiration 10 years after the initial declaration.

Are Canada and Mexico being treated the same in these talks?
No. The U.S. is currently holding formal negotiations only with Mexico. While the U.S. Trade Representative remains in discussions with Canadian trade minister Dominic LeBlanc, there is no formal schedule for talks with Canada.

What are the primary U.S. demands regarding auto manufacturing?
U.S. negotiators have requested that all North American-built vehicles contain 50% U.S.-specific content, a move that would raise the total regional content requirement to 82% to qualify for U.S. benefits.

How will these shifting trade demands impact the long-term stability of supply chains across North America?