US Trade Representative Ambassador Jamieson Greer announced on Wednesday, 1 July that the Trump administration has declined to renew the United States-Mexico-Canada Agreement (USMCA) in its current form, triggering a formal renegotiation process while the pact remains operational. The decision followed the first mandatory six-year joint review of the agreement, which originally entered into force on 1 July 2020.

What Washington Decided

'The United States did not agree to renew the USMCA in its current form. As a result, the USMCA is not renewed,' Greer said in an official statement issued after the trilateral review meeting. He added that the US would 'continue to engage with Mexico and Canada to address the Agreement's shortcomings and our trade deficits with these countries,' while confirming the pact remains in force pending resolution.

Crucially, under the USMCA's own review mechanism, a failure by all three parties to agree on an extension does not automatically terminate the agreement. Instead, it initiates a negotiation window during which trade flows continue uninterrupted. A senior administration official also confirmed that President Donald Trump retains the legal authority under US law to withdraw from the agreement before that process concludes.

The Core Grievances: Deficits, Dairy, and Energy

A senior administration official told reporters that the administration views the USMCA as having modernised North American trade rules but having failed on one of its primary objectives — reducing the US trade deficit. 'The primary issues that the president's been focused on... is our trade deficit,' the official said. 'We believe that the USMCA did not operate to control the deficit as the president intended.'

Specific flashpoints cited include Canada's dairy sector market access restrictions and unresolved disputes over US energy and agricultural exports to Mexico. The administration characterised these as persistent structural imbalances that the existing agreement had not corrected.

What the Renegotiation Will Target

The United States is scheduled to hold a third round of bilateral negotiations with Mexico during the week of 20 July. According to the senior official, the talks will focus on strengthening rules of origin, enhancing North American economic security, improving labour and environmental compliance, and expanding intellectual property protections.

The administration is also pushing for stronger US content requirements in manufactured goods. 'What we don't want is a situation where... everyone says, fine, I'm just gonna move everything to Mexico and import to the US duty-free,' the official said, signalling a clear intent to close loopholes that allow tariff-free access without sufficient domestic production.

Canada in the Crosshairs

Discussions with Canada are also set to continue, though the tone from Washington was notably sharper. The senior official criticised Ottawa's retaliatory measures against US tariffs and flagged what the administration considers unresolved non-tariff trade barriers as additional sticking points in the relationship.

Background: From NAFTA to USMCA

The USMCA replaced the North American Free Trade Agreement (NAFTA) on 1 July 2020, following years of negotiations led by President Trump during his first term. It introduced updated rules on digital trade, labour standards, automotive manufacturing, and intellectual property, while embedding a mandatory joint review every six years — the very mechanism now triggering this renegotiation. The design was deliberate, the official noted: 'The idea was to make sure that any agreement between Mexico, Canada and the United States always put America first rather than let a trade deal persist on autopilot over decades as had happened with NAFTA.'

With bilateral talks with Mexico resuming in late July and Canada negotiations ongoing, the shape of North American trade — and its ripple effects on global supply chains — will be closely watched in the weeks ahead.