The US has formally started joint review of USMCA

Why is the USMCA up for review?

The USMCA mandates that by July 1, 2026, the U.S., Mexico, and Canada review the operation of the agreement. Following this review, all three parties must agree whether or not to extend the term of the agreement for another 16-year term. Failure to agree to do so will not lead to the immediate end of the agreement (per USMCA Article 34.7) . Instead, there are another 10 years (until 2036) when the parties can seek to reach agreement on extending the USMCA’s term. Failure to reach agreement by 2036 will result in the termination of the USMCA.

Is a successful joint review in 2026 important?

Yes. The USMCA gives businesses, who need to make decisions about where to invest or who to trade with, greater certainty as to the rules that govern each country’s largest trade and investment relationships. While imports from Mexico and Canada have been subject to U.S. tariffs this year, most trade across the three countries continues to face zero tariffs, underscoring the ongoing importance of the agreement. The USMCA also commits all three governments to high levels of labor rights standards and environmental protection. That said, the various U.S. tariffs on imports from Canada and Mexico have injected considerable uncertainty into the trilateral economic relationship, particularly when it comes to auto supply chains and industries using steel and aluminum. According to our analysis, Canada now faces a trade weighted average of 9.8%, and Mexico of 5.2%, up from 0.1% and 0.3%, respectively, at the beginning of the year.

That said, there are some bright spots. Higher U.S. tariffs on imports that are non-USMCA compliant have led to sharp increases in imports from Canada and Mexico entering the U.S. that are USMCA compliant—from around 50% to over 85%. As a result, over 85% of U.S. imports from Canada and Mexico continue to enter the U.S. duty free.  

Tariffs on Mexico and Canada have a particularly pronounced economic impact on the U.S. as Mexico and Canada are the United States’ first and second largest trading partners—with two-way trade in 2024 worth $935.1 billion and $909.1 billion, respectively. Moreover, these numbers understate the importance of the trade relationship for the U.S., as the complex supply chains that govern around half of trade across North America from autos to aircraft to medical equipment mean that exports from Mexico have around 40% U.S. content. In the case of autos, those produced in Canada contain around 50% U.S. content. Our analysis also shows that exports across North America support over 17 million jobs. These numbers alone underscore the economic stakes in maintaining and improving the USMCA. There are geopolitical stakes as well. If the U.S. is serious about reducing dependencies on Chinese-centered supply chains—or when it comes to critical minerals—then partnering even more closely with Canada and Mexico will be needed.

Should the parties fail to agree to extend the USMCA for another term at next year’s joint review, this will call into question the three governments’ ongoing commitment to the agreement. This will inject additional uncertainty into the trilateral economic relationship and make it even harder for businesses to undertake the investments that each country needs.  

What is a joint review anyway?

The USMCA mandates a joint review but provides no additional language on what this is or how it should be done. According to U.S. officials who negotiated the USMCA, the intent of the joint review is to require the three governments to regularly assess whether the agreement is operating as well as it could be and to update the agreement as needed. This means that the joint review could be anything from a meeting to discuss the agreement’s operation to a full-fledged renegotiation—though appetite for the latter across the three governments is limited. The USMCA implementing language also does not seem to envision a joint review being a renegotiation. Most likely, the U.S. will seek some changes to the agreement while avoiding a full-blown renegotiation that would require approval by Congress.

The joint review should aim to update the USMCA in key areas such as autos, supply chain security, and effectiveness in upholding labor standards. At the same time, the USMCA needs all governments to recommit to the agreement’s dispute settlement mechanism to resolve trade disputes.

How will the US prepare for the joint review?

The USMCA itself does not specify how each government prepares for the joint review. This is a matter of each country’s domestic laws. In the U.S., legislation implementing the USMCA requires the following:

• The president must “consult with the appropriate congressional committees and stakeholders” on “any recommendation for action to be proposed at the review” and the decision on renewing the agreement.
• At least 180 days before the review (January 2026), USTR must report to the appropriate congressional committees:
  • “The assessment of the Trade Representative with respect to the operation of the USMCA;
  • The precise recommendation for action to be proposed at the review and the position of the United States with respect to whether to extend the term of the USMCA;
  • What, if any, prior efforts have been made to resolve any concern that underlies that recommendation or position; and
  • The views of the advisory committees established under section 135 of the Trade Act of 1974 … regarding that recommendation or position.”

In addition, should either Canada or Mexico not agree to extend the term of USMCA, then at least 70 days before the joint review, USTR is to report to congressional committees:

• Any reasons offered by either Canada or Mexico for why they are unable to agree to extend the term of the USMCA;
• Progress made to address issues raised by the country;
• Any proposed action USTR intends to raise during the meetings; and
• The views of the Trade Act of 1974 advisory committees.

In addition, USTR must respond in a timely manner to any questions from appropriate congressional committees regarding the joint review meetings, “including by submitting to those committees copies of any proposed text that the Trade Representative plans to submit to the other parties to the meeting.” Taken together, preparation for the joint review provides Congress with a real opportunity to ensure that its views are included and addressed in the review.

The USMCA joint review will be a high stakes test of whether the Trump administration is committed to USMCA and by extension its vision of the future of international trade and investment among its largest trading partners. Does Trump see Canada and Mexico as partners in U.S. geopolitical competition with China in building more competitive industry and in generating jobs? Or is Trump heading toward a more go-it-alone approach to international trade, no matter the costs? July 2026 will be a defining moment.