By Bob Brewer, Braumiller Law Group
The exit of a country, such as the U.S., from the USMCA, well, that’s just crazy, right? Afterall, it’s a powerhouse of a trade agreement between the three nations. According to the U.S. International Trade Administration, the United States conducts over $1.3 trillion in annual trade with Mexico and Canada under the USMCA framework and supports roughly 17 million jobs across North America. The USMCA also currently supports recordbreaking regional trade, with North America trading $1.8 million per minute. These figures include goods and services flowing both directions across the three economies. Mexico alone accounts f0r an estimated $900 billion in bilateral trade with the U.S. (based on the most recent U.S. Census data through Oct. 2025) Total two-way trade between the US and Canada for 2025 is estimated at around $800 billion. (U.S. Census data through Oct. 2025) This, among many other solid trade related economic reasons, such as decades in the making of supply chains, is why the USMCA is considered the backbone of North American economic integration. Ok, enough with the preliminary fluff, this agreement could be in trouble.
So, here we are, coming up on a six-year review in July of 2026, and the geopolitical landscape between the three countries is far less than stellar. The 25% tariffs slapped on Canada and Mexico back in March of 2025, was the first grenade thrown by the U.S. in the ensuing trade war, and retaliation comes in many forms, but Canada and Mexico have chosen to simply direct their energy and attention elsewhere around the globe. Granted, 85% of trade between the three countries was protected via the USMCA, but the tariffs made a statement to both Canadian Prime Minister Mark Carney and Mexico President Gloria Sheinbaum, and they get it, the U.S. is no longer a staunch ally regarding trade, which makes the USMCA seem more like a prayer moving forward, rather than a documented promise. If a country, like the U.S. does decide to exit, it must submit the formal documentation for departure 6 months in advance. As I tapped the keys writing that last statement, I shook my head in disbelief that something like this could actually happen. Of course, I never thought we would attack Venezuela, then tell Mexico they could be next, or simply say that “we don’t need Canada” and then tell them that they’d be better off if we just annexed their country. The acquisition of Greenland, and the U.S. not ruling out military force, wow, you have to be kidding. (I previously wrote about Greenland and its appeal to the U.S. https://www.braumillerlaw.com/rare-earth-minerals-part-2-enter-greenlands-global-significance/) Mexico and Canada now look elsewhere for global trade partners, as the U.S. relationship is tentative with both at best. Afterall, USTR Greer explicitly said the U.S. could exit, revise, or renegotiate the agreement — “all of those things are on the table”. Idle threat or not prior to the July meeting, those words sink deep and were the catalyst for Mexico and Canada getting really busy making “other arrangements” for the sake of one’s economy. Trump has said he may renegotiate, let it expire, or scrap it entirely, and Carney, probably a little more than Sheinbaum is preparing for the worst.
So, let’s take a look at what each country is looking for in this meeting of the minds and then the various scenarios regarding possible outcomes. Exactly where this meeting in July will take place, it’s anybody’s guess, so mine is Mar- A- Lago. If it becomes too stressful at least you could schedule a massage onsite,
USTR Jamieson Greer, has outlined several “structural issues” that the U.S. wants addressed including the potential replacement with nonbinding bilateral frameworks. Meaning, the administration has floated replacing USMCA with separate U.S.–Canada and U.S.–Mexico frameworks, which would be more flexible and less legally binding. The U.S. also wants deeper alignment on tariffs, export controls, and investment screening. These are framed as nationalsecuritylinked structural issues. The U.S. also wants policy concessions from Canada and Mexico and wants Canada to continue pausing its digital services tax (DST) and repeal two Canadian laws related to digital services and tech regulation. This includes AI regulation, privacy & data, and cybersecurity. These are presented as preconditions for a successful review. When it comes to Mexico the U.S. seeks concessions on energy policy, labor enforcement, longstanding trade disputes, and tariff relief negotiations which are already underway. It goes without saying, but I’ll say it anyway, the U.S. will be leveraging the review to address nontrade issues such as cooperation on migration, drug trafficking, continental defense, and broader security cooperation. Tariffs of course are a major part of the negotiating tool to pressure Canada and Mexico into concessions, which are already backfiring pre-discussion. The re-routed energy exports to China are already making a huge statement regarding Canada’s diversification strategy. More to come with this developing relationship with Beijing as Carney travels to China Jan. 13–17, 2026 to discuss trade, energy, agriculture, and security.
So, what does Mexico want from the 2026 USMCA Review? Well, Mexico’s goals fall into three categories, preserve stability, protect manufacturing competitiveness, and strengthen trilateral cooperation. Their biggest priority is operational certainty for exporters and investors. Mexico has seen record breaking FDI in the last year and wants that surge to continue. They see the review as an opportunity to protect the continuity of integrated supply chains, especially in autos, electronics, and nearshoringdriven manufacturing. The government wants to avoid changes that would disrupt rules of origin, increase compliance burdens, or introduce volatility. This is why Mexico is approaching the review as a stability exercise, not a renegotiation. Industry consultations show Mexico is concerned about Automotive ROO (Rules of Origin) tightening, and new content requirements and changes that could undermine nearshoring momentum. Their position is to keep ROO predictable (substantial transformation, or not) and avoid new constraints that would raise costs or push production out of North America. As far a strengthening the trilateral Cooperation Mexico wants the review to reinforce—not weaken—North American integration. IMO, Mexico is making a lot of sense. According to the Mexico Business News analysis, Mexico wants stronger trilateral coordination to support longterm competitiveness. Therefore, their position is that the review should be used to consolidate North America’s position in global supply chains, not fragment it. Obviously, this approach is in direct conflict with that of the U.S. They also wish to protect all the nearshoring gains that Mexico has acquired since the introduction of Section 301 back in 2018. Mexico’s manufacturing boom is driven by U.S. reshoring/nearshoring, integrated supply chains and predictable market access. Their goal is to lock in these advantages by ensuring the review does not introduce uncertainty that could scare off investment. They did their homework to address practical industry concerns by conducting a 60day public consultation with 30 industrial sectors, all 32 states, along with exporters and logistics operators. This process identified concerns around ROO, Customs procedures, regulatory coordination, supply chain resilience, and predictability of enforcement mechanisms. Mexico wants these issues addressed without reopening the entire agreement. They also would like to avoid U.S. tariff escalation. Who wouldn’t? Good luck there. President Sheinbaum and Economy Minister Marcelo Ebrard have been clear on this stating that Mexico wants to avoid inflationary shocks or production disruptions caused by ongoing tariff battles. However, currently on display, Mexico is adjusting its own tariffs (which primarily affect China) to protect domestic industry while keeping North American supply chains stable. As a result, there is now a 50% tariff on Chinese vehicles and 35% on 1,463 product categories. Believe it or not, and it’s hard to, BYD is still considering building a plant in Mexico.
What does Canada want from the 2026 USMCA Review? Well, much like Mexico, Canada’s objectives fall into similar categories such as protecting the status quo and avoiding a destabilizing renegotiation, an unrealistic wish in this writer’s opinion. They want to secure relief from U.S. tariffs being weaponized, and they want to defend key Canadian policy areas (dairy, alcohol, digital services) Canada’s goals include keeping the agreement intact, avoiding a return to bilateral deals, preventing the U.S. from tightening rules of origin or adding new constraints, and maintaining predictable market access for the 75% of Canadian exports that go to the U.S. When it comes to the tariffs, Canada is under pressure from U.S. tariffs on steel, aluminum, autos, and lumber. I put together a very short, somewhat humorous video on the Canadian lumber tariff: “How much wood could a woodchuck chuck? https://www.braumillerlaw.com/tariffs-on-canadian-lumber/ Canada wants the review to roll back these tariffs, stabilize crossborder industrial supply chains, and reduce inflationary pressure on Canadian manufacturers. U.S. Trade Representative Jamieson Greer flagged several Canadian policies as irritants such as the dairy market access, alcohol distribution rules, digital services laws. Carney acknowledged these issues but framed them as part of a “much bigger discussion” about continental trade—not something Canada wants to renegotiate chapterbychapter. Canada’s position is that these “irritants” can be discussed, but they want to avoid reopening entire chapters and keep the review narrow and technical which could otherwise drag on for months. They also want the discussion to be based on facts. One of which is that the U.S. has never even come close to filling the dairy quotas that would trigger Canada’s high overquota tariffs. Canada’s dairy import system uses tariffrate quotas (TRQs), and inside the quota there is a low or zero tariff. And above the quota there are very high tariffs reaching 200–300%. I have even heard 500% from the Trump administration. But the key point here is that U.S. exporters have never been able to fill those quotas. U.S. dairy groups say they “aren’t able to get anywhere near that cap” even when Canadian buyers want the product. The tariff “trigger” exists on paper, but the quota has never been met, so the punitive tariffs never activate. The real dispute isn’t about tariffs being charged, but instead Canada preventing the quota from being filled in the first place.
When it comes to leverage, Carney made a pointed statement that U.S. access to Canada’s critical minerals is not guaranteed and is part of a broader negotiation. Canada wants to use its position as the largest supplier of steel, aluminum, uranium, and a major source of critical minerals as leverage to secure a stable, predictable USMCA renewal. They want to maintain integrated North American supply chains as Canada’s economy is deeply tied to U.S. manufacturing with 85% of U.S. electricity imports coming from Canada, as well as 60% of U.S. crude imports. (Think Venezuelan oil at the forefront of a U.S. solution) Bottomline, Canada wants the review to reinforce, not disrupt, this integration. Maybe a little bit Pollyanna in its approach, but it’s the right one. Just look at what the tariffs on the auto sector have done to General Motors. Their tariffrelated losses in 2025 are estimated at $4–$5 billion for the full year, based on GM’s own earnings disclosures and industry analysis. Layoffs and plant closures are also a big part of the rather dismal picture.
In the meantime, Canada and Mexico are deepening their bilateral alliance. Canada is explicitly strengthening its trade and political ties with Mexico to reduce dependence on U.S. unpredictability. Prime Minister Carney is building a bilateral relationship that can “operate independently of the whims of the White House”. Canada and Mexico announced a new comprehensive partnership and security dialogue during Carney’s state visit to Mexico. The strategic purpose is to create a united front and a fallback partnership if the U.S. pushes for major changes or threatens withdrawal.
Canada has also opened a major door with the EU. According to CBC and Global News reporting and the EU’s own announcement, the deal includes:
- A formal Security and Defense Partnership — the first of its kind between Canada and the EU.
- A pathway for Canada to join SAFE, the EU’s joint armsprocurement program, an $860 billion project of rearming the EU over the next five years, exclusive of any U.S. involvement
- Access for Canadian firms to the €1.25trillion ReArm Europe defenseindustrial initiative — effectively a huge new export market.
- Expanded cooperation on cybersecurity, maritime security, and counterdisinformation.
- Deeper defenseindustrial integration, including joint R&D and procurement.
- A commitment to launch talks on a Digital Trade Agreement (separate but linked to the summit outcomes).
- Reaffirmation of CETA, which the EU notes has increased bilateral trade by 71% since 2017.
This matters economically speaking since it opens new procurement markets for Canadian defense and dualuse manufacturers, reduces Canada’s reliance on U.S. procurement channels — a strategic shift Carney emphasized, and aligns Canada with Europe’s emerging allied industrial policy, which is becoming a major economic bloc in its own right. This is part of a broader Canadian strategy to diversify away from U.S. dependence in both trade and security — especially as U.S. trade rhetoric becomes more tarifforiented again, and again, and again. Just take a look at the $262 million Hudson Bay railway project in the arctic trade corridor that now bypasses U.S. ports in a direct line to the European market.
So, Canada is aggressively pursuing new global trade partners, and Mexico is pretty much just aligning with the U.S. As previously mentioned, the joint review starts July 1, 2026. If all three approve, USMCA runs another 16 years; if not, it slides into annual reviews and can ultimately expire in 2036, or a party can withdraw earlier. All three countries enter the room with apprehension. Will it be a review vs. renegotiation, or will the U.S. just walk away. If proposed changes stay within existing authority and finetune implementation, it’s a “review”; if they rebalance obligations/remove benefits, you’re functionally in “renegotiation” territory. Let’s face it, if the U.S. doesn’t get what they want from either country, there is a good chance the threat of walking away will be on the table.
So, here are some scenarios:
Scenario 1) USMCA survives basically intact. The review becomes a structured, disciplined process (minimal finger pointing with the blame game) that focuses on fixing implementation issues, clarifying rules, and codifying panel decisions, without reopening every chapter. They could decide to tighten up implementation problems, spend some quality time clarifying rules of origin (we run into this issue in many of our consultations), create Bonafide dispute panels, and tweak some of the labor/environment enforcement. The U.S. administration will most likely choose predictability and will use the review for global optics as the big bad bear but will not lay out systembreaking demands. Domestic lobbies will mostly stress the cost of uncertainty rightfully so, and public consultations will skew toward “fix it, don’t scrap it.” The outcome could be a renewed agreement for 16 years, and the next review would be in 2032.
Scenario 2) The U.S. pushes meaningfully for changes, but the three governments stay inside a tradefocused, rulesofengagement framework without the U.S. throwing its economic weight around. The somewhat polite discussion centers around clearly defined subject areas for revision such as labor enforcement, automotive ROO calibration, digital trade, maybe a little bit of dairy or energy. Other areas will be explicitly cordoned off as “not under review for the sake of getting through what could be considered the first stage. Then out of the blue the U.S. threatens tariffs selectively but signals it wants a deal, not collapse. If in the room both Carney and Sheinbaum would look at each other and nod, knowing this was coming. Canada and Mexico could then ever so slightly trade concessions in sensitive sectors for predictability and tariff relief. This outcome could be revised but a somewhat recognizable USMCA being the product of a renewal agreed upon, though after friction, and a few profanities under one’s breath, along with some market volatility of course. The renewal includes a focus on autos, EVs, minerals, and digital. Expect parameter shifts (thresholds, enforcement intensity, carveouts), and not an entirely new game.
Scenario 3) The review becomes nothing more than a tool in a pressure campaign by the U.S. In this case the U.S. uses the sunset as a bargaining chip across nontrade issues (migration, drugs, security, reshoring) and maintains or threatens broad tariffs. Not to mention, but I will, the potential direct confrontation with the cartels on Mexican soil. We’ve been down this road for too long, so hopefully cooler minds will prevail. Tariffs already imposed on Mexico and/or Canada (or the continued threat of them) could bleed into 2026. The review is treated as leverage to extract broader policy cooperation, not just trade concessions. There would be no quick agreement on a renewal, and the USMCA may slide into subsequent annual reviews if they can’t conclude a full renewal package. Canada and Mexico could respond with tighter coordination between the two countries via joint messaging, joint proposals, and the solidification of their own bilateral trade and security frameworks to hedge U.S. volatility.
Scenario 4) Either the U.S. formally signals withdrawal or lets the agreement crawl with a slow, but consistent bleed toward the 2036 expiration without renewing, while of course continuing to wield tariffs as a club and implement unilateral measures. This is also where the U.S. announces intent to withdraw and the countdown clock starts, at six months from the formal signature. Or, there would be no agreement in 2026, repeated annual reviews, mounting uncertainty, and no real stabilization. The problem here is that the U.S. treats tariffs and the threat of USMCA collapse as ongoing tools of economic and migration policy. Canada and Mexico would of course accelerate hedging, which is already taking place regarding more deals with EU, Asia, and each other, as well as more active creation of nonU.S. trade corridors. There would be a repricing of the once North American “integration premium” more regional silos (e.g., Mexico–Latin America triangle, Canada–EU/IndoPacific, China in particular linkages). Contracts and investments would center around bilateral side deals.
Scenario 5) Political leadership in all three countries chooses a strategic, longterm view: The USMCA is perceived as the core platform for competing with China/EU and for managing external shocks. Explicit principles would prioritize external challenges, focus on longterm integration, and use the review as a platform for broader initiatives (e.g., joint EV strategy, critical minerals, supplychain security). There would be a crystal-clear timebound negotiation with a solid commitment not to weaponize withdrawal during the process. There would also be more robust coordination on security, digital, critical minerals, and maybe even climate (no chance) and industrial policy. Imagine a stronger predictability for longterm projects allowing for clearer regional division of labor in autos, EVs, and energy. This scenario is by far the least likely under the current geopolitical landscape between the three countries. I came within a gnat’s eyelash of not even writing about it. It’s a damn shame.
In the end, all bodies still accounted for, under U.S. law, if the U.S. withdraws from USMCA, the USMCA Implementation Act stops applying to Mexico and Canada. The statute is pretty explicit stating that when a country “ceases to be a USMCA country,” the USMCA Implementation Act “shall cease to have effect with respect to that country.” If the agreement ceases to be in force with respect to the U.S., the Act ceases to have effect entirely (except for a few technical sections). The translation here is that all U.S. domestic laws that implement USMCA obligations will cease to exist and the tariffs will snap back to PreUSMCA levels if the U.S. leaves. The USMCA tariff preferences would also disappear. Trade with Canada and Mexico then reverts to WTO MostFavoredNation (MFN) tariffs unless new bilateral deals are negotiated. This means that autos, auto parts, steel, aluminum, agriculture, and machinery would all face higher tariffs. Supply chains built around dutyfree North American integration since the origination of NAFTA back on January 1st, 1994, would become much more expensive and a lot less predictable. (NAFTA became USMCA on July 1st, 2020)
Let’s get with the program people and save it. The USMCA is the backbone of integrated manufacturing across the continent with automotive as a prime example of how effective the alliance can be when allowed to perform unimpeded as it should. Putting some agreed upon top economist numbers to it, without the USMCA crossborder auto production becomes much more expensive tacking on between $6,000 -$15,000 additional dollars on the average priced car. There would also be a less synchronized approach creating a loss of nearshoring momentum in Mexico bringing it to a crawl. Canadian and Mexican exporters would also lose guaranteed access to the U.S. market, and the U.S. manufacturers would face higher input costs, especially in autos, electronics, and machinery. A true kiss of death to many companies in the U.S.
Geopolitical consequences are huge regarding this upcoming meeting as ending USMCA would benefit China and Russia by weakening North American economic integration via a reduced ability to compete with China in particular in manufacturing (Russia’s economy is on life support due to the sucking sound of money getting poured into the war) There would also be a weaker regional resilience against global shocks, and a loss of a unified North American strategy on supply chains, energy, and critical minerals.
My expectations are pretty damn low regarding a rosy outcome, but I hope like hell I am wrong. The fact remains, all three economies depend greatly on each other in so many ways that it would be counterproductive to not fully resolve any issues amicably and move forward in unity, onward and upward. Sing it with me now! (in the style of, possibly YMCA ) Onward, and upward, we’re moving past defeat. Onward and upward, the word is on the street…………..CUSMA, T-MEC or USMCA ……the pact is here to stay… and will never go away. Onward and upward….Onward and upward…😊