Key Takeaways:
The first joint review of the USMCA trade pact opens this month with the U.S. auto industry demanding structural changes that could reshape North American supply chains.
The U.S. is pushing to raise regional content requirements for duty-free vehicles to 82% as USMCA renewal talks open, with Ford Motor Co. calling for penalties on import-reliant automakers including Toyota and vehicles GM imports from overseas.
"Automakers that produce a majority of their vehicles domestically should be rewarded, while those that rely on imports should face penalties," Jim Farley, chief executive officer of Ford, said in a CNBC interview July 2.
The U.S.-Mexico track has completed two rounds of negotiations, with a third scheduled in Mexico City for the week of July 20. The first round in Mexico City centered on auto rules of origin, steel and aluminum, while the second in Washington focused on agriculture and energy. Canada has been largely excluded from those sessions, though Trade Minister Dominic LeBlanc has held bilateral meetings with U.S. Trade Representative Jamieson Greer to defend duty-free access and raise concerns about proposed auto and dairy changes.
The joint review, a first-of-its-kind provision under the 2020 agreement that replaced NAFTA, determines whether the pact extends for another 16 years or enters a 10-year termination clock expiring in 2036. If all three parties do not agree to extend, USMCA remains in force but moves onto the termination timeline, with the agreement set to expire unless a new deal is reached.
Three scenarios, one deadline
Chad Hart, a professor in the Department of Agricultural Economics at Iowa State University, outlined three potential outcomes. A straight renewal would extend the deal for 16 years with a review in 10 years. An extension with limited concessions would allow small changes without formal re-ratification. If no agreement is reached, USMCA continues but with minor annual concessions — an outcome Hart said the Trump administration is hinting at.
The current average U.S. tariff on Mexican and Canadian goods stands near zero under USMCA. The last major escalation in North American trade tensions occurred in 2018-2019 when the U.S. imposed 25% tariffs on steel and 10% on aluminum from both countries, prompting retaliatory measures that affected $12.8 billion in U.S. exports before the USMCA was ratified. After those tariffs, U.S. agricultural exports to Mexico fell 8% over six months while Canadian retaliatory tariffs targeted $16.6 billion in American goods including soybeans, pork and whiskey.
Agriculture exposure runs deep
A Purdue University study commissioned by the Corn Refiners Association found that every 1% reduction in tariffs on food products corresponded with an average 2.8% decrease in consumer food prices over a decade. Without USMCA, tariffs could rise by an average of 7.4% above current levels, effectively eliminating those savings within 10 years.
In 2025, U.S. corn exports to Mexico and Canada more than doubled in value to more than $6.2 billion, up from pre-USMCA levels. The National Corn Growers Association has said U.S. farmers cannot afford to lose 1.8 billion bushels of corn demand that is at stake if the agreement stalls.
Harrison Pittman, director of the National Agricultural Law Center at the University of Arkansas, said the joint review process is a new provision without precedent. "From an institutional perspective, what role does Congress want to play in the joint review process, and what role does it actually play?" Pittman said. "If there is a lack of congressional involvement at this phase, does that portend a more challenging process for any congressional action later?"
President Donald Trump has given mixed signals about USMCA, and the bifurcated pace of talks — U.S.-Mexico discussions advancing faster than those with Canada — adds uncertainty. If the U.S. secures higher regional content rules with Mexico but fails to reach parallel terms with Canada, the auto industry could face a fragmented North American supply chain, raising costs for manufacturers that operate across all three markets.
This article is for informational purposes only and does not constitute investment advice.
