A New Chapter in Trade: Preparing for the Landmark Review of the USMCA

USMCA To Undergo Review in 2026

When the North American Free Trade Agreement (NAFTA) was renegotiated into the United States-Mexico-Canada Agreement (USMCA) during the Trump administration, a novel provision on review and extension of the agreement was included. Under this provision, the Canadian, Mexican, and U.S. governments are to participate in an open-ended review of the agreement six years after its entry into force on July 1, 2020. During this review, the three parties will also decide whether to extend the agreement for an additional 16 years. 

This process will be a learning experience for all three parties, as there is nothing quite like it elsewhere in international trade agreements. The Canadian Parliament has just begun its preparation for the review, with trade experts testifying before an international trade committee. Mexico and the United States should begin their own processes soon, as each will have important questions to answer in terms of how to approach the review and the decision on whether to extend the agreement.

This commentary examines the review and extension provisions, the Canadian government’s initial preparations, and the political dynamics shaping the process. 

Review and Extension Provisions

Early in the renegotiation of NAFTA, the Trump administration proposed a sunset provision under which a renegotiated agreement would automatically expire after five years, unless all three parties affirmatively decided to extend it. This proposal received serious pushback from Canada and Mexico, and was ultimately revised into a more modest — albeit complex and convoluted — provision under which the agreement would terminate 16 years after it entered into force unless certain conditions were met.

The conditions start with a “joint review” of the agreement that takes place no later than the sixth anniversary of its entry into force, during which “any recommendations for action submitted by a Party” will be discussed, and “appropriate actions” taken. The substance of the review is not specified in any detail and will depend on what the governments of each party want to discuss at that moment. The conversations could involve anything from minor tweaks to threats of withdrawal unless major changes are made.

In addition, as part of the review, the governments can also express their desire to extend the agreement. If all three parties do so, the agreement gets extended for another 16-year term. However, if all three parties do not confirm their desire to extend the agreement as part of the six-​year review, they will meet again in the seventh year, and each year thereafter until the 16th year. If they cannot agree by the 16th year, the agreement terminates. (The extension/termination provision is independent of the right of any party to withdraw from the USMCA six months after providing written notice.)

Canada’s Parliament Kicks Things Off

In terms of formal preparation for the review, the Canadians have jumped out to a lead. The Standing Committee on International Trade in Canada’s House of Commons is the first legislative committee to consider the 2026 USMCA review. At the end of May, it began a comprehensive study of the issue, bringing in witnesses from industry, trade associations, unions, nongovernmental organizations (NGOs), and think tanks. All of these perspectives and interests will be considered, and the Canadian government will then formulate an overall position for the review.

Early meetings as part of the committee’s study illustrate some of the key issues that will be of interest to the Canadians:

• A representative of the steel industry brought up concerns about making sure trade remedies — such as antidumping, countervailing duties, and safeguards — are effective. 
• Trade remedies were also raised in relation to Canadian exports of lumber to the United States, a long-standing U.S.-Canada trade irritant.
• A representative of the manufacturers and exporters association pushed for “deeper North American economic integration” in order “to compete at a time in which the global economic and security environment is shifting beneath our feet.”
• Two Conservative members of Parliament (MPs) worried about how a Canadian carbon price could harm domestic steel producers.
• A dairy industry representative raised concerns about U.S. pressure on Canadian dairy import restrictions and regulations.
• MPs and witnesses discussed the role of Canadian investment in critical minerals as a counter to Chinese influence.
• There was a push by some MPs and witnesses for stronger enforcement of the novel USMCA labor rights mechanism, with a reference to the recent vote in Alabama against unionizing a Mercedes factory.
• One MP raised electric vehicle (EV) manufacturing in Canada as an important issue, and a witness pushed for strengthening Canada’s role in the EV supply chain.
• A witness noted concerns about digital trade issues, including both U.S. pressure on Canadian legislation and regulation, as well as the impact of the USMCA’s general rules in this area.

One of the trade experts called to testify expressed a general concern about how the USMCA review negotiations might go. He noted that “a smooth ... review is unlikely ... because that was never the intention of the Trump administration when they negotiated the deal.” He added that the Biden administration shares this perspective, citing U.S. Trade Representative Katherine Tai’s recent comments that “the whole point of the review is to maintain a certain level of discomfort” for Canada and Mexico.

Separation of Powers May Slow the US Down

Canada’s parliamentary system makes its internal process for USMCA review preparation fairly straightforward: The party in power at the time of the review will be in charge of how Canada approaches the review and the extension decision. By contrast, in the United States, there could be conflict between the different branches of government and between the two major political parties on how to proceed with both. 

During a congressional hearing in 2019, the role of Congress in the review and extension process came up in an exchange between a member of Congress and then-U.S. Trade Representative Robert Lighthizer; subsequent questions from a U.S. senator also addressed this point. However, the issue was never fully resolved, and how Congress and the executive branch will each see their role in the review in practice remain unclear. 

The implementing legislation for the USMCA does provide for the executive branch to consult with Congress and stakeholders about the review process. It also requires the U.S. Trade Representative to publish a notice about the review at least 270 days before it begins and to provide opportunities for public comments and a hearing. Additionally, the U.S. Trade Representative must provide the appropriate congressional committees its assessment of the operation of the USMCA, recommendations for actions to be proposed at the review, and the U.S. position on whether to extend the term of the agreement. 

Within these requirements, however, there is a good deal of discretion in the executive branch over how to take into account congressional views. Similar to the Canadian Parliament, Congress is likely to hold hearings on the USMCA in order to gather information from U.S. stakeholders. For legal purposes, it appears that the ultimate decision on whether to extend the USMCA after six years is entirely in the hands of the executive branch. Beyond the legal aspects, however, there are also political elements to this decision, and the role of Congress will likely depend in part on the composition of the House, the Senate, and the presidency at the time of the review. Indeed, each country’s approach will be significantly influenced by the outcomes of its national elections.

National Elections Could Influence the Process

As for the third USMCA party, Mexico’s recent election resulted in the Morena party maintaining power. This outcome could indicate that Mexico’s position on the USMCA will not shift significantly, although incoming President Claudia Sheinbaum might have her own views on what changes are needed in the agreement. Indeed, there is a good deal of uncertainty as to how she will govern in practice. 

And in Canada, elections are due to take place before the end of 2025. A shift in power to the Conservative Party could have a modest impact on Canada’s position, although its pro-trade sentiment is not likely to change significantly. 

The biggest electoral question is in the United States, where a future President Trump would likely take a very different approach compared to a reelected President Biden. Both have shown protectionist tendencies, but Trump has made statements suggesting he would go much further down the road of economic nationalism than Biden. 

US and Mexico Should Follow Canada’s Lead 

The USMCA review and extension process is new and untested, and its impact could range from modest adjustments to full-scale renegotiation. Every stakeholder with an interest in the review — businesses, NGOs, unions, academics, and others — should start preparing their views now so as to communicate them clearly to the government officials who will be in charge of the negotiations. 

Canada has begun that process, and Mexico and the United States should follow suit quickly. In Mexico, controversies over party control of the Mexican legislature, along with laws and constitutional amendments proposed by the Morena party, may be distracting government officials at the moment. And in the United States, the upcoming presidential election is the primary focus of political attention. Nonetheless, both governments would be well advised to begin efforts similar to Canada’s.

This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy. The views expressed herein are those of the individual author(s), and do not necessarily represent the views of Rice University’s Baker Institute for Public Policy.