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USMCA Watch: The Latest on the North American Trade Agreement

USMCA Watch: The Latest on the North American Trade Agreement

ATN BREAKING NEWS |

USMCA Watch: The Latest on the North American Trade Agreement

October 27, 2026 | ATN Trade & Finance

The United States-Mexico-Canada Agreement is at an inflection point. The agreement's mandatory six-year joint review came and went on July 1, 2026, with no extension — an outcome that formally placed one of the world's largest trade relationships into annual review mode. Four months later, the US-Mexico bilateral track is making incremental progress while the US-Canada track is mired in tariff escalation and mixed signals. The agreement itself remains fully in force and will through July 1, 2036, but the path to a confirmed 16-year renewal is far from clear.

The July 1 Review: No Extension Triggers Annual Process

The USMCA's Article 34.7.4 requires the three parties to hold a joint review after six years in force. If all three confirm they want to extend, the agreement continues for another 16 years. If they do not, the parties must convene a new review annually until either an extension is agreed or a party withdraws.

On July 1, 2026, the Free Trade Commission met virtually. Canada and Mexico both supported a 16-year extension. The United States did not. USTR Ambassador Jamieson Greer issued a statement saying the US "did not agree to renew the USMCA in its current form," citing the agreement's "shortcomings" and US trade deficits with both countries. The agreement has not lapsed — it remains in force under its original term — but the failure to extend means the three parties must now review it again in 2027, and every year after that until the question is resolved.

US-Mexico: Progress on 40 of 54 Issues, Fourth Round Pending

Washington and Mexico City had been in bilateral talks since May 2026, running parallel to the formal review. Three rounds were completed — in Washington (May), in Washington again (June), and in Mexico City (July 21–23). Before the third round, Economy Minister Marcelo Ebrard said talks had resolved the "vast majority" of the 54 items on the US list; by September, the number of unresolved US concerns had been reduced to approximately 14.

A fourth round was scheduled for Washington on September 28–29, but was postponed on September 23. Mexico cited scheduling conflicts; media reports indicated Washington requested the delay, linked to the timing of President Xi Jinping's US visit and the G20 summit. Ebrard and Greer met on the G20 sidelines, with no outcome announced. Mexican undersecretary Luis Rosendo Gutiérrez said a fourth round in October remained likely, though as of this writing no date has been set. USTR has stated its goal is interim arrangements with both countries by year-end, though a comprehensive resolution could extend into 2027.

The Automotive Rules of Origin Fight

The hardest bilateral issue between the US and Mexico is automotive rules of origin. Under the current USMCA, vehicles must contain 75% North American content to receive preferential tariff treatment — there is no country-specific share requirement. The US has proposed replacing that structure with a requirement that 50% of a vehicle's value come specifically from the United States. Mexico opposes the US-specific carve-out and has linked any concession on origin rules to relief from the Section 232 tariffs Washington currently applies to Mexican steel (50%), aluminum (50%), and autos (25%). Mexican officials estimate that an interim deal could bring the effective light-vehicle tariff to 10–12%, but no steel or aluminum rate agreement has been announced. Automakers and supply-chain analysts have noted that changes to origin rules could require significant restructuring of supplier networks and raise per-vehicle compliance costs.

US-Canada: Tariff Escalation and Mixed Signals

The US-Canada track has followed a sharply different path. Formal USMCA-review negotiations between Washington and Ottawa were limited through the summer; Canada's Prime Minister Mark Carney, who framed the review as "a checkpoint, not a cliff," declined to move as quickly as Mexico toward bilateral accommodation. In August, the US imposed 50% tariffs on Canadian goods under Section 338 of the Trade Act of 1974 — a novel use of that authority — applicable regardless of USMCA-origin status. Canada suspended talks and introduced counter-tariffs on US products effective September 8, covering furniture, apparel, steel, aluminum, and other goods at rates of 15%, 25%, and 50%.

As of this morning — October 27, 2026 — a Canadian government official said talks have continued but there has been "limited progress." Prime Minister Carney acknowledged talks have "picked up pace" in recent days, and President Trump indicated he would lift some of the 50% tariffs on Canada at the end of the month. Unresolved issues between the two countries still include steel and aluminum tariff levels, automotive content requirements, and softwood lumber — a perennial point of friction that predates the USMCA by decades. A deal before the US midterm elections next week has been suggested as a possible timing target by US officials, though Canadian officials are more cautious.

What This Means for Trade Flows

Roughly 85% of Mexican exports to the United States currently enter duty-free under USMCA. That share has been maintained through the review period, providing relative stability for manufacturing and near-shoring activity — though a KPMG survey conducted in September found foreign direct investment in Mexico was down approximately 10% year-over-year, and 42% of Canadian manufacturers said they had shifted or were planning to shift production to the US. Canadian exporters face a structurally different situation: USMCA-compliant goods are still being hit by Section 338 tariffs, eroding the preference margin the agreement was designed to provide.

What this means: The USMCA is not in danger of collapsing — the agreement runs through 2036 absent a formal withdrawal, and neither Mexico nor Canada has threatened to withdraw. What is in play is the terms of eventual renewal and the near-term tariff environment that governs North American trade in the meantime. The US-Mexico track has been more productive: 40 of 54 American concerns appear resolved, and both sides want a deal by year-end. The US-Canada track is harder, and the 50% Section 338 tariffs — unprecedented in the agreement's history — represent a level of pressure that has no obvious precedent in USMCA-era trade diplomacy. For exporters, importers, and supply chain managers, the near-term planning challenge is not the agreement's eventual fate but the tariff volatility that characterizes the review process itself.

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