USMCA Watch: The Latest on the North American Trade Agreement

October 22, 2026 | ATN Trade & Finance

The United States-Mexico-Canada Agreement is in an unusual condition: not renewed, not renegotiated, not expired, and not under any single negotiating table. After the mandatory six-year joint review was held on July 1, 2026 without a US commitment to extension, the agreement entered a new legal phase — annual reviews until the three parties agree to extend or the current term ends on July 1, 2036. In the weeks since, Canada and the US have moved toward a trade confrontation while the US and Mexico continue active bilateral talks. Here is where each track stands.

The July 1 Review: Not Renewed, Still in Force

USMCA Article 34.7 required a joint review six years after entry into force. Canada and Mexico both signaled in advance — and confirmed on the day — that they supported a 16-year extension. The US did not. USTR Ambassador Jamieson Greer's statement said the US "did not agree to renew the USMCA in its current form," making this the first time in the agreement's six-year life that renewal was affirmatively declined.

The practical effect is that Article 34.7.4 is now triggered: the Free Trade Commission must hold a joint review every year for the remainder of the term. The agreement itself — its tariff schedules, rules of origin, dispute settlement, and all preferential treatment — stays fully in force. Nothing at the border has changed as a result of the July 1 outcome. What has changed is the political and contractual architecture: rather than operating against a backdrop of near-certain permanence, traders and investors now face annual checkpoints at which the agreement's future is formally on the table.

US-Canada: Breakdown and Retaliation

Bilateral talks between the United States and Canada collapsed on August 21, 2026. The following day, the Trump administration reimposed 50% Section 338 tariffs — previously paused — on approximately $20 billion in Canadian exports, covering wine, furniture, dairy, cement, clothing, and consumer goods including items as specific as fishing rods and hockey equipment. Critically, these tariffs do not provide an exemption for USMCA-compliant goods, making them a direct override of the agreement's preferential treatment for the affected categories.

Canada responded with retaliatory tariffs on US steel, electronics, dairy, appliances, agricultural equipment, pulp and paper, and other products, effective September 8. Ottawa announced support measures for vulnerable Canadian sectors, including softwood lumber and wine. Prime Minister Mark Carney's stated position is that Canada will match US tariffs "dollar for dollar." On September 29, the US went further, imposing import bans on certain Canadian products.

The sticking points that broke the talks were multiple. The US complained about Canada's dairy quota system and provincial restrictions on US alcohol sales. The treatment of medium and heavy-duty trucks was a specific flashpoint: Canada wanted the light-duty vehicle terms extended to heavy trucks, which would have protected Canadian-built models including the Ford F-350, F-450, F-550 and GM Silverado HD. The US refused. Carney also cited US proposals that would limit Canada's ability to sign future trade deals independently and others that he said impinged on Canadian cultural and sovereignty commitments. USTR Greer confirmed after the breakdown that no new talks with Canada are currently planned.

US-Mexico: Active Talks, Deferred Finish Line

The US-Mexico bilateral track is actively proceeding, and both sides have described the talks as constructive. Four rounds of negotiations have occurred:

Round 1 (Mexico City, May 28–30): Automotive rules of origin, steel and aluminum, and economic security.
Round 2 (Washington, June 16–17): Rules of origin for industrial goods, economic security, and early discussions on agriculture, labor, environment, and trade in steel, aluminum, and autos.
Round 3 (Mexico City, week of July 20): Focus on resolving outstanding issues.
Round 4 (Washington, September 2026): Covered in the same framework.

Mexican Economy Minister Marcelo Ebrard has described Mexico as pursuing its own separate track and said Mexico would need to see any final US-Canada agreement terms before fully aligning. USTR has indicated it is aiming for interim bilateral deals with both Mexico and Canada before year-end, but the most contentious issues — automotive rules of origin, labor standards, and environmental standards — are expected to be deferred to 2027 negotiations.

The Central Fight: Automotive Rules of Origin

The most commercially significant unresolved question is automotive content. The current USMCA baseline requires 75% regional value content (RVC) for qualifying vehicles — a significant increase from NAFTA's 62.5%. The US is pushing the new threshold to 82% North American content, with a specific requirement that at least half originate in the United States itself. That US-origin sub-floor would fundamentally restructure where auto parts investment flows within North America.

A separate compliance dispute has been unresolved for nearly four years: a December 2022 dispute panel ruled against the US on its "core parts roll-up" method for calculating automotive RVC. The US has not complied with the ruling, and neither Canada nor Mexico has yet suspended benefits in response. That unresolved finding remains live in any renegotiation discussion.

Chinese-affiliated manufacturing in Mexico has emerged as a distinct US concern. Chinese investment in Mexican auto manufacturing has grown roughly fivefold since 2015, and the US is pushing for tighter investment screening and stricter origin tracing for Chinese-affiliated firms in Mexico and Canada to prevent Chinese content from qualifying under the USMCA umbrella. Canada separately allows up to 49,000 Chinese-made EVs annually at the 6.1% MFN rate under a February 2026 deal, while maintaining a 100% tariff on Chinese EVs outside that quota.

What's Next: The USTR Comment Window

USTR is now building the record for the 2027 Joint Review. On October 15, it opened a public comment period on the operation of the USMCA, with submissions due by January 12, 2027 (docket USTR-2026-0595, hearing requests under USTR-2026-0596). USTR is specifically soliciting input on five areas: the agreement's operation and implementation; compliance by all three parties; recommended actions for USTR to pursue; the North American investment climate; and economic security, including countering the "non-market policies and practices" of non-USMCA countries — a phrase that maps directly to China concerns. The January 12 deadline is the formal gateway through which trade associations, manufacturers, agriculture groups, and importers can shape US negotiating positions before the 2027 review.

What this means: USMCA in its current form is operational — preferential tariffs, rules of origin certifications, and dispute settlement all continue to function — but its political future is now openly contested. For Canadian exporters in dairy, lumber, automotive, steel, and aluminum, the Section 338 tariffs already represent a meaningful cost increase on roughly $20 billion of annual trade that previously moved duty-free. For Mexican and US manufacturers in the automotive supply chain, the push to 82% regional content with a US-origin sub-floor would require significant supply chain restructuring before any new threshold takes effect. And for businesses in all three countries that have built sourcing, production, and investment decisions around USMCA's continuity, the shift from assumed permanence to annual review is itself a cost — it puts a risk premium on long-term capital commitments that depend on cross-border preferential access.

Sources:

USMCA Watch: The Latest on the North American Trade Agreement

USMCA Watch: The Latest on the North American Trade Agreement

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