US rejects extension of USMCA in its current form

Background: Tariffs and demands on the auto industry

The background to the conflict is the unilateral tariffs that US President Donald Trump has imposed on the two neighbors in recent months. Most recently, Trump had levied 25 percent import duties on cars from Mexico and Canada, as well as 50 percent on metals. In previous negotiations, the US government had demanded that vehicles built in North America must consist of 50 percent US parts.

For his part, Canadian Trade Minister Dominic LeBlanc stated that the agreement would remain fully in force until 2036. His government would also continue to work on finding a solution to the tariffs imposed by US President Donald Trump on Canadian steel, aluminum, cars, and lumber. A senior US government official stressed: „Die Vereinigten Staaten werden den Dialog mit Mexiko und Kanada gegebenenfalls fortsetzen, und während dieser Zeit bleibt das Abkommen in Kraft."

Reactions from Canada and Mexico

Mexican President Claudia Sheinbaum appeared similarly willing to compromise. The current day had not been a deadline, said Mexican President Claudia Sheinbaum, and cooperation would continue. Further negotiations with Mexico are planned for the week beginning July 20; a third round of negotiations between the three states is also scheduled for July 20.

The USMCA entered into force in 2020 and is the successor to the NAFTA agreement concluded in 1994. Trump himself had set the USMCA in motion in 2020 during his first term, at the time calling it „das beste Abkommen, das wir je geschlossen haben". At the same time, he had called the earlier NAFTA „den schlechtesten Deal aller Zeiten". The agreement governs duty-free trade among the three countries, grants US farmers improved market access in the neighboring states, and contains provisions on the protection of intellectual property and on digital trade.

Pressure potential through annual review

Observers see the new review mechanism as a leverage tool for Washington. The US could use the mechanism to exert political pressure on Mexico and Canada – for example on issues such as drug trafficking or energy policy, according to Germany's foreign trade promotion agency Germany Trade and Invest. The Trump administration also wants to involve Congress in reshaping the agreement.

The US government also pointed out that Trump reserves the right to terminate the agreement early if necessary. This leaves the trade architecture of North America uncertain for years to come – despite the assurance that the USMCA will continue to operate in its existing form for the time being.

The USMCA entered into force in 2020 and is the successor to the NAFTA agreement concluded in 1994. Trump himself had set the USMCA in motion in 2020 during his first term. The agreement governs duty-free trade among the three countries and contains new provisions for the automotive industry.