June 10, 2026

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USMCA Review Tests North American Trade Amid Growing U.S.-Canada Frictions

(AP Photo/Evan Vucci, Pool)

The upcoming review of the United States-Mexico-Canada Agreement (USMCA), set for July 1, has emerged as a political and economic test of the trilateral relationship of North America’s largest economies. Originally conceived as a checkpoint to assess the effectiveness of the trade agreement six years after its implementation, the impending review is taking place during a period of growing tensions between Ottawa and Washington, bringing the broader U.S.-Canada relationship into question. While some experts say the USMCA is unlikely to collapse, officials familiar with the matter told Bloomberg they expect the countries to miss the July 1 deadline, with U.S. President Donald Trump instead preferring annual reviews of the agreement, as well as separate talks with Mexico and Canada.

The USMCA was entered into force in July 2020, replacing the 1994 North American Free Trade Agreement (NAFTA). NAFTA helped reshape economic relations in North America by integrating economies and facilitating the development of highly interconnected supply chains across sectors ranging from the automotive industry to the agricultural industry. Although the updated agreement preserved many provisions of NAFTA, it also introduced new terms, including a review mechanism, a digital chapter, and updates on labor laws, among others.

The review comes amidst the continued expansion of competition with China, persistent supply chain disruptions from global events such as the COVID-19 pandemic and the U.S. war with Iran, and shifting geopolitical alliances. As such, countries including the U.S., Canada, and Mexico have promoted collaboration to relocate production away from competitors and foster greater intra-regional economic cooperation. However, as relations between the U.S. and its USMCA counterparts have faltered since Trump’s return to office and cooled relations with regional counterparts, this review mechanism has injected an element of uncertainty into the future of North American trade.

U.S.-Canada relations have fallen under strain since Trump’s return to office, particularly over the sweeping U.S. tariffs imposed on a large number of international trading partners, including Canada. Since taking office in March 2025, Canadian Prime Minister Mark Carney has made economic and security diversification from the U.S. a central pillar of his foreign and economic policy. In a speech days after he was sworn in as prime minister, Carney spoke on Canada’s relationship with the U.S., stating: “The old relationship we had with the United States, based on deepening integration of our economies and tight security and military cooperation, is over.” As such, his government has pursued investment and infrastructure projects and trade agreements with countries like Japan, the United Arab Emirates, and Indonesia. Additionally, Carney has sought to deepen economic and defense ties with Europe, even attending the 8th European Political Community Summit in Yerevan, Armenia, in early May, as the first non-European guest. Carney will also meet with European leaders, including Ireland and France, over the next week as he heads to Europe for the 2026 G7 Leaders’ Summit.

Canada’s shift reflects a consensus amongst Canadian policymakers that the U.S. has become a less predictable and reliable partner, especially in the economic realm. However, Canada’s efforts to diversify both its economy and security sector face significant constraints. The U.S. remains by far Canada’s largest trading partner, with 73 percent of Canada’s exports going to, and 46 percent of Canada’s imports coming from, the United States in 2025. Decades of integration have also produced deeply interconnected supply chains across the automotive, energy, manufacturing, and agricultural industries. In relation to USMCA, Canada has officially requested a renewal of the free trade agreement. The Canada-U.S. trade minister Dominic LeBlanc, called the agreement “highly beneficial.” U.S. and Canadian officials met in Washington last week, and Canadian officials said they had a “positive” meeting to try to move forward with official talks; however, no such talks have taken place yet.

Mexico, on the other hand, began trade talks with the U.S. — with the U.S. explicitly excluding Canada — with the first of three rounds having already taken place in Mexico City in late May. According to a press release by the United States Trade Representative's office, the meeting discussed priority topics like automotive rules of origin, steel and aluminum trade, and economic security. The press release stated that the next meeting, occurring in Washington next week, will continue to focus on these issues, with the addition of the agricultural sector and “reducing the playing field.”

On trade, Mexico has largely avoided retaliatory escalation with the U.S., instead opting to employ a de-escalation strategy through negotiations, migration enforcement, and counternarcotics operations. Trump appears to have engaged with this strategy more than Canada, which is perhaps why Mexico has been included in trade talks with the U.S. while Canada has been excluded. Canada’s absence in trade talks will likely reinforce its position to continue reducing its reliance — both economically and militarily — on the U.S. and pursue diversification of both commercial and security ties with actors both in the Americas and further abroad, marking a new chapter in Canadian foreign policy. Yet, the USMCA review presents an opportunity for the three countries to reaffirm their commitment to North American economic integration at a time of growing geopolitical competition. However, achieving that would require a degree of political will that is currently lacking.