By David Lawder
WASHINGTON, July 1 (Reuters) – The Trump administration on Wednesday declined to extend the U.S.-Mexico-Canada Agreement, starting a decade-long clock to wind down the trade deal as it seeks changes to try to reshore manufacturing jobs and reduce U.S. trade deficits with its North American neighbors.
The decision, revealed after a six-year review of the North American free trade zone, keeps the agreement in place for another 10 years with annual reviews before it expires, unless the three countries agree to renew it with changes.
“The United States did not agree to renew the USMCA in its current form,” U.S. Trade Representative Jamieson Greer said in a statement. “As a result, the USMCA is not renewed. The United States will continue to engage with Mexico and Canada to address the agreement’s shortcomings and our trade deficits with these countries.”
Greer said the U.S. will proceed with a USMCA bilateral negotiating round scheduled with Mexico during the week of July 20. A senior administration official said that those talks in Mexico City would focus on strengthening North American rules of origin for autos and other industrial goods and economic security to keep other countries from benefiting from USMCA access.
Mexican Economy Minister Marcelo Ebrard said in a video message on X that Mexico would go along with annual reviews, but work to resolve disputes in the trade deal that underpins a highly integrated North American economy with nearly $1.6 trillion in annual trilateral goods trade.
“We’re in no rush, but we also don’t want any uncertainty, which is why we need to try to reach an agreement on many issues we’ve been working on for months — issues that could change from one day to the next,” said Ebrard, who participated in a virtual meeting on Wednesday with Greer and Dominic LeBlanc, the Canadian minister responsible for U.S.-Canada trade.
LeBlanc added that Canada would continue to work to address President Donald Trump’s tariffs on Canadian steel, aluminum, autos and lumber.
“We agreed on the importance of continuing our discussions and identifying ways to ensure trade and investment frameworks between Canada, the United States and Mexico continue to support North American prosperity and competitiveness,” he said.
Mexican President Claudia Sheinbaum said on Wednesday before the U.S. announcement that a USMCA extension could happen any time that the three countries reach agreement over the next decade, adding: “The joint work continues — it’s not as if everything ends today.”
DENIAL LONG EXPECTED
The U.S. decision was widely expected, as Greer said that more time was needed to address problems with USMCA, including persistent and growing U.S. trade deficits with Canada and Mexico.
The senior Trump administration official told reporters that it was still in U.S. interests to come to agreement on possibly separate trade “protocols” with Mexico and Canada “as quickly as possible,” but did not provide an expected time frame.
But the official added that Trump, who has already changed the USMCA relationship by imposing tariffs of 25% on Mexican and Canadian autos, 50% on metals, and 10% on lumber, is likely to remain skeptical of any deal.
Trump has repeatedly said that the U.S. would do better without USMCA despite launching it in 2020 as “the best agreement we’ve ever made.”
In two rounds of negotiations with Mexico, Trump’s administration has demanded that North American-built vehicles contain 50% U.S. content, pushing the regional total to 82%.
AFFORDABILITY QUESTIONS
Industry groups, including those representing automakers, have called for continuation of USMCA as a trilateral deal with duty-free trade to keep U.S. manufacturing competitive against competitors in Asia and Europe.
Nissan CEO Ivan Espinosa told Reuters that the future of the USMCA, including potential requirements for more U.S. content, could worsen a growing affordability problem for American car buyers and this needs to be considered by policymakers.
Nissan builds two small cars in Mexico for the U.S. market — the Versa and Sentra — both now subject to a 25% tariff, but they remain profitable, he told Reuters in an interview in New York.
“You cannot build all the parts in the U.S. The supply chain is not set up to do that,” he said. “We need something that is actually executable.”
(Reporting by David Lawder; Additional reporting by Kalea Hall in Detroit, Promit Mukherjee in Ottawa and Ana Isabel Martinez in Mexico City; Editing by Andrea Ricci)
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