U.S. to Discontinue Extension of USMCA Trade Agreement

According to the Office of the United States Trade Representative, the U.S. has chosen not to extend a crucial trade agreement with Canada and Mexico. July 1 marked the decision deadline for extending the United States-Mexico-Canada Agreement (USMCA) until 2042. The decision from the Trump administration keeps the USMCA in effect, subject to annual reviews for 10 years, expiring in 2036 unless further agreements extend it.

The United States will continue to engage with Mexico and Canada to address the agreement’s shortcomings and our trade deficits with these countries,” stated U.S. Trade Representative Jamieson Greer. However, the agreement remains in force pending resolution of these issues or until the agreement’s termination.

USMCA replaced the North American Free Trade Agreement in 2020. At that time, President Trump called it the “fairest, most balanced, and beneficial trade agreement we have ever signed into law.” However, Trump has since criticized the pact. In June, he expressed that the U.S. would “do better as a country” without it.
The Office of the U.S. Trade Representative indicates a meeting with Mexico is scheduled for the week of July 20 for further bilateral negotiations.

Potential Impacts of Withdrawal

The effects of the U.S. exiting the USMCA hinge on whether any new bilateral trade agreements replace it, according to trade specialists. Economists from investment advisory firm Capital Economics report that without bilateral deals, economic growth in Canada and Mexico would slow. This could occur due to the removal of tariff exemptions that have supported those countries’ external sectors over the past year. They noted that although average tariffs might increase to 10%, much lower than previous potential rates threatened under the International Emergency Economic Powers Act (IEEPA), recessions could be averted.

This story will continue to be updated as new information arises.