A declared non-extension starts a six-year review clock rather than triggering any immediate change to trade flows, so the near-term market impact is limited, but it keeps a long tail of uncertainty over North American auto and steel supply chains that has already been compounded by existing US tariffs on Canadian and Mexican autos, parts, steel and aluminium. The more actionable detail is the US push for regional auto content requirements as high as 82%, a threshold that would force real supply chain reshuffling for automakers already navigating a patchwork of tariffs, and is worth watching for any read-through to North American auto sector earnings and capex guidance. Canada being sidelined from formal negotiating rounds, even as bilateral irritants pile up, adds a layer of political risk to the process that could keep the Canadian dollar and Canadian auto and steel names more exposed to headline risk than their Mexican counterparts in the near term.
The US is expected to decline extending USMCA on Wednesday, starting a six-year review clock as Canada and Mexico push for the pact to continue.
Summary:
- The Trump administration is expected to formally decline to extend the US-Mexico-Canada trade agreement on Wednesday, starting a six-year review process under the pact’s built-in sunset clause, according to Reuters
- Trade officials from the US, Mexico and Canada are due to meet virtually to declare whether they want to extend the pact for a further 16 years
- Without agreement, the pact would remain in an annual review cycle before expiring in 2036
- Mexico’s president and economy minister both said they expect the agreement to continue, while Mexico has formally requested a 16-year extension
- Canadian Prime Minister Mark Carney said Canada’s priority is negotiating a new deal, expecting a constructive but non-binding exchange on Wednesday
- Trump has already imposed tariffs of 25% on Canadian and Mexican autos and parts and 50% on steel and aluminium from both countries, prompting retaliation from Canada
- The US is currently holding formal negotiating rounds only with Mexico, with a third round scheduled for later in July, while talks with Canada remain informal
- US negotiators have demanded North American-built vehicles contain 50% US-specific content, which would push required regional content to around 82% to qualify for preferential treatment
- The American Automotive Policy Council, representing Ford, General Motors and Stellantis, called for a swift and durable resolution to provide investment certainty
The Trump administration is expected to formally decline to extend the US-Mexico-Canada Agreement on Wednesday, starting a six-year review process under a sunset clause built into the pact by Trump’s first administration, according to Reuters. The declaration is not expected to materially shift the substance of ongoing negotiations, which continue to centre on sweeping US demands to raise North American automotive content requirements and on measures to prevent Chinese goods from benefiting indirectly from the trade zone.
Trade officials from the US, Mexico and Canada are due to meet virtually to declare whether they wish to extend the pact for a further sixteen years. A spokesperson for US Trade Representative Jamieson Greer said no formal announcement of intent has been made, though Greer has already scheduled a further round of negotiations with Mexico for later in July, signalling the US intends to keep pushing for changes rather than simply reaffirm the existing pact. Absent agreement on revisions, the trade pact would remain in an extended limbo, subject to annual review sessions over the following decade before expiring in 2036.
Mexico’s government has pushed back against the idea the deal is at risk, with the economy minister saying he does not expect the pact to be scrapped and the president confirming she has signed a formal letter requesting a sixteen-year extension. Canadian Prime Minister Mark Carney struck a more cautious tone, saying he expects a constructive exchange on Wednesday but no agreements to be signed, and that Canada’s priority is negotiating an improved deal rather than simply preserving the status quo. Carney noted that technical talks on aluminium, steel, autos and softwood lumber have produced some progress, even though Canada has not yet joined formal negotiating rounds with the US.
Trump has already moved unilaterally to alter the terms of North American trade by imposing tariffs of 25% on Canadian and Mexican autos and parts and 50% on steel and aluminium from both countries, prompting retaliation from Canada. For now, formal US negotiations are proceeding with Mexico alone, while discussions with Canada remain at a more informal, ministerial level amid a broader list of bilateral irritants including Canada’s dairy market restrictions and provincial moves to pull American liquor from shelves.
North American automakers have urged Washington to preserve the trilateral structure of the agreement, warning that parts frequently cross US borders multiple times before final vehicle assembly. The American Automotive Policy Council, representing Ford, General Motors and Stellantis, called for a swift and durable resolution that provides investment certainty, arguing that US automakers are currently disadvantaged relative to countries facing a flat tariff without comparable rules of origin requirements.
At the centre of the US-Mexico talks is a demand that North American-built vehicles contain 50% US-specific content, which sources say would push the overall regional content threshold required for preferential treatment to around 82%. Vehicles built in Mexico and Canada would still likely face some level of tariff regardless. Mexican officials say the two countries broadly agree on the underlying problems facing the pact, including declining US manufacturing employment, falling US content in vehicles as Asian-made parts increase, and growing concerns over transshipment, even as they continue to negotiate how best to address them.
This article was written by Eamonn Sheridan at investinglive.com.