U.S.-Canada-Mexico Agreement Internal Review Begins

In this video from The Franklin Partnership, contributing author Omar Nashashibi discusses the start of first six-year review of the U.S.-Mexico-Canada-Agreement (USMCA).

Policymakers in Washington, D.C., Mexico, and Canada are preparing for the first six-year USCMA review, which entered into force on July 1, 2020. The agreement — which replaced North American Free Trade Agreement — requires the three parties after six years to affirm they will remain in the USMCA for another 16 years.

If one party does not agree but does not withdraw, the three countries will conduct a review annually until its termination on July 1, 2036. The parties can extend the agreement for an additional 16 years at any time during subsequent annual or six-year joint review periods.

In meetings held recently with the Office of the U.S. Trade Representative (USTR), officials say they are actively seeking stakeholder input as they prepare for negotiations with Canada and Mexico ahead of and during the first six-year review scheduled for July 2026.

What the USMCA talks may mean for manufacturers

Manufacturers and distributors should follow these initial talks closely as even without any changes to the agreement the U.S. might seek in 2026, several provisions already in the USMCA take effect in the coming years which will impact supply chains. Beginning in 2027, the North American steel content requirement for passenger vehicles, light trucks, and heavy trucks, increases from the current 70 percent by value to all steel must be melted and poured in North America. In addition, much of the rules of origin requirements are not fully in implemented until 2027.

While these dates may seem far in the future, government officials are working with stakeholders now.

USMCA’s focus on the automotive industry

On July 1, USTR released its second biennial Report on the Operation of the USMCA with Respect to Trade in Automotive Goods. The USTR report says, “automotive suppliers report that the complexity of the rules of origin continues to impose administrative burdens on suppliers, and evidence suggests that suppliers are not attempting to claim USMCA preference for a growing share of automotive parts trade.

Labor stakeholders expressed concerns that a lack of transparency around implementation and enforcement of the rules of origin.”

The report, while covering activity in North America under the USCMA, focuses extensively on China as among the challenges facing the automotive sector in the U.S., Canada, and Mexico. USTR says, “non-market excess capacity from the People’s Republic of China has crowded out domestic suppliers across the autos supply chain and threatens to do so as well for finished EVs.”

To respond in part to these challenges, the three countries agreed in May to jointly expand their cooperation on issues related to non-market policies undermining the USMCA. Many here in Washington expect some updates to either the agreement itself or additional policies by the parties to address many of these concerns.

Next steps in the USMCA review

Aside from USTR’s review of the USMCA, an independent federal agency, the U.S. International Trade Commission, is holding a public hearing on October 8 on the economic impact and operation of USCMA’s automotive rules of origin. The ITC will then issue a report by July 1, 2025, to the president and relevant congressional committees on the economic impact of the USMCA automotive rules of origin on U.S. gross domestic product, U.S. exports and imports, employment, and other topics.

A main purpose of Free Trade Agreements (FTA) is to provide certainty and stability for supply chains. This is how the new NAFTA varies from previous FTAs — there is built-in uncertainty with the six-year review and the 16-year term.

How we can help

We will continue to follow discussions among the U.S., Canada, and Mexico, and internal deliberations here in Washington as policymakers may include many of the ideas discussed today as part of future revisions to the USMCA. Reach out to understand how this might impact your manufacturing company.