The United States–Mexico–Canada Agreement, the backbone of North America’s competitiveness, will undergo its formal review starting July 1, 2026. What was once expected to be a routine assessment aimed at improving implementation is now likely to become a high-stakes negotiation.
The first thing to understand about the July 1 date is what it is and what it is not. July 1 is not a deadline for completing negotiations. Under Article 34.7 of the USMCA, if all parties agree to continue, the agreement remains in force for an additional 16 years. If one party does not confirm its intent to extend, the parties must conduct annual joint reviews for 10 years, after which the agreement expires in 2036.
That architecture means the worst-case scenario — USMCA collapsing on July 2 — is not realistic. The realistic scenarios range from a clean extension to a prolonged annual review process that sustains uncertainty across North American supply chains for years. A clean, early extension by July 1 now appears unlikely. The review launched only on March 18, bilaterally rather than trilaterally, narrowly scoped, with no text on the table beyond the existing agreement.
How the Negotiations Stand
The United States and Mexico have formally launched the review process and started technical rounds to narrow key issues ahead of the July 1 decision point.
Mexico is seeking an early deal in high-impact sectors like steel, aluminum, and autos before the formal review reaches its most sensitive phase, aiming to protect regional supply chains and avoid further erosion of investment confidence.
U.S. Trade Representative Jamieson Greer and Mexican Secretary of Economy Marcelo Ebrard met in March to kick off bilateral technical discussions. Technical teams were instructed to review specific options for increasing U.S. and Mexican production and manufacturing employment, while limiting non-market inputs — meaning Chinese goods — into North American supply chains.
That last phrase — “limiting non-market inputs” — is the central demand driving the entire negotiation. Washington’s core concern is that Chinese goods are entering the U.S. market at lower tariff rates by being processed or assembled in Mexico, effectively circumventing the tariffs the Trump administration has placed on Chinese imports.
Mexico has taken concrete steps to align with U.S. priorities, including placing tariffs on 1,400 products targeting Chinese imports and working through 52 U.S. trade demands, positioning itself as Washington’s preferred negotiating partner.
Canada, for its part, is largely absent from the process. Reports indicate growing friction between Washington and Ottawa, with some speculation about a bilateral deal between the U.S. and Mexico that could sideline Canada, though this remains an outlier scenario. Meanwhile, Canada and Mexico have begun their own bilateral economic dialogue, adding a further layer of complexity.
The Four Sectors With the Most at Stake
Four sectors face heightened exposure from the USMCA review: automotive, energy, financial services, and agriculture.
Automotive is the most consequential. The USMCA’s rules of origin require that a significant percentage of vehicle content be sourced from North America — and the U.S. is pushing for higher thresholds and minimum U.S. content requirements that would require Mexican and Canadian manufacturers to shift supply chains away from Asian components. Mexico’s automotive sector employs hundreds of thousands of workers and accounts for a significant share of its export earnings. Any meaningful tightening of content rules has direct consequences for Mexican manufacturing employment.
Energy has become politically charged following the Sheinbaum government’s implementation of Mexico’s 2021 electricity law, which gave preferential treatment to state energy company CFE over private and foreign electricity generators. The U.S. has formally raised this as a USMCA violation, arguing it disadvantages American energy companies. Mexico has maintained that energy sovereignty is a constitutional matter. The gap between those two positions has not narrowed.
Financial services and agriculture carry significant bilateral implications but have received less public attention than autos and energy. The digital trade provisions — which prohibit data localization and protect cross-border data flows — are a growing priority for U.S. technology firms operating in Mexico and Canada.
What Mexico Has to Lose
The political context suggests this process will likely be a comprehensive renegotiation of key USMCA provisions. The Trump administration is poised to seek additional concessions from Mexico and Canada on long-standing trade disputes, while also leveraging the review to address non-trade issues such as migration, drug trafficking, and continental defense.
Mexico’s exposure to the outcome of this review is larger than Canada’s or the United States’ by any proportional measure. Approximately 80% of Mexico’s exports go to the United States. USMCA is not simply a trade arrangement for Mexico — it is the structural foundation of the country’s export economy, built over three decades of integration with U.S. and Canadian supply chains.
A prolonged annual review process that keeps that foundation uncertain has measurable effects on investment decisions, particularly in manufacturing sectors where multi-year capital commitments depend on regulatory stability.
Mexico’s investment data already shows the effect. Private investment growth slowed significantly in 2025 and the World Bank has flagged investment uncertainty as a primary constraint on Mexico’s economic outlook for 2026.
The USMCA uncertainty is one factor among several — alongside the security situation in cartel-affected regions and the broader bilateral tensions over drug enforcement — but it is a quantifiable one.
Why This Matters for Latin America
The USMCA review's direct parties are Mexico, the United States, and Canada. Its indirect effects extend across Latin America in ways that make it the most consequential single economic event in the hemisphere this year.
Mexico’s integration into North American supply chains creates ripple effects across Central America and the Caribbean — countries whose own export industries, remittance flows, and migration patterns are tied to Mexican economic performance.
A weakened Mexican manufacturing sector, or a prolonged period of investment uncertainty, reduces the economic gradient that determines whether workers in Honduras, Guatemala, and El Salvador stay home or move north.
For South America, the USMCA’s China provisions are the most directly relevant. If Washington succeeds in tightening content rules that limit Chinese inputs into North American supply chains, it creates pressure on Brazilian, Chilean, and Peruvian exporters to demonstrate that their own products do not contain Chinese components that would trigger scrutiny under the same framework.
The U.S.-China trade war is not a North American story. It is a global supply chain story, and North America’s largest trade agreement is one of the places where it is being fought.
The Six Scenarios
There could be six scenarios for the USMCA review: a clean early extension, a partial deal with unresolved issues, a prolonged annual review, a bilateral U.S.-Mexico deal that sidelines Canada, a comprehensive renegotiation, or — least likely — expiration in 2036 after a decade of failed annual reviews.
The most probable outcome, according to most trade analysts, is a combination of the second and third: a partial set of understandings on the highest-priority issues — automotive content, Chinese inputs, energy — with remaining disputes carried forward into annual reviews. That outcome keeps USMCA alive and functional while sustaining the uncertainty that complicates long-term investment planning.
Five weeks from July 1, that is where North America’s defining trade agreement stands.
Sociedad Media will continue to cover USMCA negotiations and their implications for Latin America. Tips, sources, and feedback welcome at info@sociedadmedia.com
