North America trade talks test USMCA as U.S. pursues separate Canada, Mexico tracks

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USMCA trade talks split

Highlights

U.S. President Donald Trump declined to extend USMCA for 16 years, triggering annual reviews and bilateral, rather than trilateral, negotiations among the U.S., Canada, and Mexico until at least 2036.
U.S.-Mexico talks are six months ahead of U.S.-Canada discussions, increasing Mexico's prospects for investment certainty and advantageous terms, particularly regarding steel tariffs.
Trump imposed 50% tariffs on multiple Canadian goods, setting a 30-day deadline for Canada to reach a deal as Ottawa negotiates to eliminate both new and existing steel and aluminum tariffs.

Separate negotiation tracks reshape USMCA review

As reported by Reuters, U.S. President Donald Trump's July 1 decision not to extend USMCA for another 16 years leaves the pact in force but subjects it to annual reviews until the three countries agree to renew it or it expires in 2036.

That framework is now being tested by bilateral negotiations rather than a unified trilateral process. People from all three countries familiar with the talks say the nations will keep engaging separately while hoping any two-country understandings can later be folded back into a broader North American arrangement.

Mexico is beginning its third round of formal bilateral talks this week, while Canada has had no formal round and is relying on calls and occasional Washington meetings between Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer. A Mexican official familiar with the negotiations says the U.S.-Mexico talks are about six months more advanced than the informal U.S.-Canada discussions, potentially giving Mexico greater investment certainty and better terms in areas such as steel tariffs.

Trump increased pressure on Canada on Monday by imposing 50% tariffs on a wide range of goods, with his administration citing Canadian auto and dairy policies as well as provincial alcohol bans. Canadian Prime Minister Mark Carney said on Tuesday that he and Trump agreed to intensify talks, while Canada hopes any deal will remove steel and aluminum tariffs and prevent the new measures from taking effect next month.

High stakes for regional industry and political strategy

The economic implications are significant for both U.S. neighbors and for companies operating across integrated supply chains, especially automakers whose production networks cross North American borders multiple times. The three economies conduct about $1.6 trillion in annual goods trade under the agreement, which has also protected Canada and Mexico from many of Trump's broader global tariffs.

Mexico and the U.S. broadly agree on several issues they want to address, according to the Mexican official, including falling U.S. manufacturing employment, the rising use of Asian components in North American vehicles and the transshipment of goods from outside the region. Mexico has already responded to some U.S. concerns by imposing tariffs on non-free-trade partners, tightening customs rules and addressing intellectual property issues.

Trade specialists say Canada and Mexico face different political constraints in responding to Washington. Mexican President Claudia Sheinbaum has made concessions she can present as aligned with domestic priorities, including tighter border security, lower fentanyl trafficking and closer scrutiny of Chinese investment, while Carney faces pressure after winning last year's election on a promise to stand up to Trump.

Canadian officials reject the view that Ottawa is falling behind. Gabriel Brunet, spokesperson for LeBlanc, says Canada is ready to expedite trade pact talks and has submitted proposals it views as fair, balanced and beneficial for the broader North American economy.

The central risk for both countries is that one bilateral deal becomes the template for the other, forcing a choice between accepting the model or delaying a trilateral outcome. Canadian negotiators now have a 30-day window before the new tariffs take effect, but Ottawa has indicated it will not accept unfavorable terms simply to secure a quick agreement, and the longer review timeline could allow Carney to negotiate later with a different U.S. president.

In our earlier report on the Trump administration’s aluminium tariff relief tied to U.S. smelter investment, we described how companies could qualify for incentives worth half of the current 50% tariff on raw aluminium feedstock by committing to build or expand domestic smelting capacity. We also noted the policy’s national-security rationale and the industry concern that rebuilding sufficient, high-purity supply could take years.

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