USMCA Watch: The Latest on the North American Trade Agreement
October 21, 2026 | ATN Trade & Finance
The USMCA entered a new and uncertain phase this summer, and the implications for North American supply chains are now operational rather than theoretical. The US declined to extend the agreement at its mandatory six-year review in July, triggering annual renewal cycles. A US-Canada tariff war has escalated to import bans. US-Mexico negotiations are substantially more advanced. And USTR opened a public consultation on October 2 that sets the stage for the 2027 joint review — with comments due January 12.
The July 1 Joint Review: Agreement Intact, Extension Rejected
On July 1, 2026, the three parties convened the USMCA's mandatory six-year joint review under Article 34.7. USTR Ambassador Jamieson Greer announced that the US "did not agree to extending the USMCA for a new 16-year term in its current form." Canada and Mexico both confirmed support for a full extension. The result: the agreement remains in force through its original expiry of July 1, 2036, but Article 34.7.4 now triggers mandatory annual joint reviews each year until the parties either agree to a 16-year extension or the agreement expires. A 16-year extension can be confirmed at any time in writing by the three heads of government without reopening the text — but as of today, no such confirmation has occurred.
USTR Opens 2027 Review Consultation — Comment Deadline January 12
On October 2, USTR published a Federal Register notice opening the public comment process ahead of the 2027 joint review. Written comments are due January 12, 2027 at 11:59 PM ET (docket USTR–2026–0595); requests to testify at a public hearing (date not yet set) are due the same day under docket USTR–2026–0596. USTR is seeking input on how the agreement operates, compliance issues, the impact of USMCA on North American investment, US competitiveness and technological leadership, and strategies for addressing "other countries' non-market policies and practices" — the last item a clear reference to China. For businesses with supply chains that cross the Canadian or Mexican border, the comment window is the primary mechanism to shape how the US approaches the July 2027 review.
US-Canada: A Tariff War Alongside the Agreement
The US-Canada relationship is the more fractured of the two bilateral tracks. The full tariff stack on Canadian imports now includes: Section 232 duties of 50% on steel, aluminum, and copper; 25% on passenger vehicles and auto parts; and 10% on timber and lumber. Section 301 forced-labor tariffs (post-July 2026) add 10% on most Canadian goods, with USMCA-compliant goods exempt. Section 338 tariffs of 50% — applied from September 15, 2026 — cover alcohol, dairy, motor vehicles, paper, and wood products, imposed as a response to what the administration characterized as Canadian discrimination against US commerce. Following Canada's September 8 counter-tariff announcement covering approximately C$27.6 billion (~US$20 billion) in US goods, the US invoked Section 338 to ban the import of certain Canadian goods, effective September 29, 2026.
Canada's retaliatory posture includes tariffs on C$15.6 billion (~US$11 billion) in US steel and aluminum, vehicle import tariffs, provincial alcohol restrictions, and reduced federal government procurement from US suppliers. Substantive text-based USMCA negotiations between Washington and Ottawa have not started; Canada's stated priority remains the removal of sectoral tariffs as a precondition.
US-Mexico: Three Rounds In, "Getting Close"
US-Mexico negotiations are on a separate and more advanced bilateral track. Three rounds of talks have been completed: Round 1 in Mexico City (May 28–30) covered auto rules of origin, steel and aluminum, and economic security; Round 2 in Washington (June 16–17) advanced industrial rules of origin and began conceptual discussions on agriculture, labor, and environment; Round 3 in Mexico City (late July) prompted Mexican Economy Secretary Marcelo Ebrard to say the two sides are "getting close" on many issues. Canada has not been announced as a participant in any of the three rounds.
Key Unresolved Issues Across the Agreement
Three disputes stand out as the hardest to resolve. On automotive rules of origin, the US and Canada disagree on how to calculate North American content for vehicles; a 2022 USMCA dispute panel ruled in Canada and Mexico's favor but left the resolution mechanism open, and the issue remains active. On dairy, a 2025 Canadian law bars the government from expanding dairy import quotas or lowering over-quota tariffs in future negotiations — effectively limiting what Ottawa can offer on one of Washington's top market-access priorities. On softwood lumber, the last bilateral agreement expired in 2015; the US currently applies anti-dumping and countervailing duties on Canadian lumber imports, which Canada is challenging through multiple forums including USMCA Chapter 10 panels and WTO dispute settlement.
Two newer issues are also in play. Canada repealed its digital services tax and is adjusting its streaming funding rules in what appears to be a concession aimed at improving the negotiating climate. On critical minerals, USTR is pursuing a potential plurilateral trade agreement that could offer Canada and Mexico preferred market access in exchange for supply-chain commitments — a track that runs parallel to the USMCA review.
What this means: The USMCA's preferential tariff rates, rules of origin, and investment protections remain in effect — businesses should not interpret the failed extension as a change to current operating rules. What has changed is the certainty horizon: every July 1 from now through 2036 is a potential inflection point, and the US-Canada tariff stack has created a parallel cost structure for cross-border goods that operates on top of the agreement. For importers with Canadian suppliers, the Section 232, Section 301, and Section 338 tariff layers are additive — and only USMCA-compliant goods are shielded from the Section 301 layer. The USTR comment deadline of January 12, 2027 is the nearest actionable date for businesses that want to influence the 2027 review outcome.
Sources:
- USMCA 2026 Joint Review: United States Declines to Extend Agreement — White & Case
- USTR Seeks Comments on the Operation of the USMCA Ahead of the 2027 Joint Review — SBA Advocacy
- USTR Initiates Next Stage of USMCA Review — Supply Chain Dive
- U.S.-Canada Trade Relations — Congressional Research Service via EveryCSRReport
- Trade Talking Points: October 15, 2026 — EY
- US Refusal to Renew USMCA: Treaty Far From Dead — Chatham House