At a Baker Institute event last week, C.J. Mahoney, who was a Deputy U.S. Trade Representative during the Trump administration, argued that renewal of the USMCA under the Article 34.7 review clause was unlikely to happen in 2026. He first provided some background on the provision:
... USMCA is up for renewal in the summer of 2026. Unlike prior trade agreements, USMCA has a fixed term of 16 years. But at the six year anniversary mark, the parties have the opportunity to extend the agreement for another 16 years. If they fail to do so by July of 2026, a 10 year clock will start to run for the eventual termination of the agreement.
The idea behind this provision, which I maintain was a sound one, was to create an incentive for policymakers to continue to upgrade the agreement periodically, so that we never find ourselves again in a situation like we were in 2017, with an agreement that was badly outdated and politically unpopular.
And then here is his argument about why it is unlikely USMCA will be renewed in 2026:
[Regardless of who is elected president,] next year will be dominated by domestic issues, mainly taxing and spending. I therefore expect that a year from today, the negotiating agenda for the United States will be unsettled and the fate of USMCA uncertain. My best guess is that the chances for an immediate renewal are quite low.
Mexico and Canada, which are heavily dependent on trade with the United States, would renew the agreement tomorrow, preferably with no changes. But from the US perspective, the costs of not renewing the agreement at the six year anniversary mark are relatively low. The agreement would still have 10 years to run. US leverage in the negotiations arguably would increase rather than decrease during that period. Yet for both a president Harris and a President Trump, the political costs of renewal would be non-trivial.
The passage of USMCA was, in my view, one of the great political hat tricks of recent years. ... name the last time that the AFL-CIO, the Teamsters, steelworkers, the Business Roundtable, Chamber of Commerce, the Farm Bureau, Nancy Pelosi, Mitch McConnell, Joe Biden and Donald Trump agreed on something. It was USMCA. Unfortunately, I don't see that same political constellation of stars aligning anytime soon.
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So if I'm right, we are headed towards an anti-climax in the summer of 2026. The parties will miss the renewal date, at which point the slow clock towards the theoretical termination of the agreement will start to run.
Finally, he put forward some things that might change this assessment:
Now what could change the dynamics? I can think of a couple things.
One is the attitude that Mexico and Canada take to the negotiations. ... the typical [negotiating] playbook is for the parties to take very extreme positions at the beginning and hold all concessions to the end. I would suggest to my friends in Mexico and Canada that that would be an unwise strategy in this instance. The biggest challenge that Mexico and Canada will face in urging a swift renewal will be getting the attention of the next administration. An indication to move in the US direction early on, on issues like energy, labor, dairy, auto rules of origin, just might grab the attention of White House. This is an unusual approach, but unique times call for novel strategies.
The second way to break the impasse would be if the next administration sees USMCA as a way to reset US trade policy generally. That could be done by expanding the scope of the agreement to strengthen the critical minerals supply chain in North America, adding new disciplines on AI governance, export controls and inbound investment restrictions, and, perhaps most intriguingly, opening the door to new members of USMCA. The two most promising candidates, in my view, would be Australia and the United Kingdom. Think of it as a merger of USMCA and AUKUS. ... it would allow the United States to bring its closest security and economic partners together under a common umbrella. In time, this bloc might use its combined leverage to negotiate with other techno democracies, like Japan, India and the EU. One might see this perhaps as the start of a new global trading system, at least one for the US and its allies, that could eventually take over, or at least supplant, the WTO. This vision might strike one as farfetched, but I think that outside of the box thinking will be necessary if we have any hope of an immediate or even near term renewal of USMCA.
Just a couple quick thoughts on his suggestions for how to get USMCA renewed in 2026. First, I'm not sure it makes sense for Canada and Mexico to give up so much to get a renewal of USMCA in 2026. It's true that they rely heavily on trade with the U.S., but if the deal starts to look unbalanced, the Canadian and Mexican governments will have a hard time defending it to their own citizens, and that puts them in a bad political position domestically.
On the expansion of USMCA, I can imagine some new rules being added, although that could be tricky because there is disagreement within the U.S. on what the rules on issues such as AI governance should look like, so it might be hard to negotiate them internationally. On the possibility of adding new USMCA members, I hear a fair amount of talk about some sort of trade club of allied democracies, but it's hard to see Trump getting on board with that because it would involve liberalization. I suppose Harris might consider it though.
Meredith Lilly of Carleton University later weighed in to agree with Mahoney on the prospects for renewal in 2026:
C.J. set this up very well, talking about the review clause. We didn't have one of those in NAFTA. It was an ongoing agreement that would last forever. And so this review clause actually is less than a page of text in the overall agreement, yet it actually stands to potentially really, really jeopardize it, frankly. And so, as C.J. outlined, if all three countries don't agree to renew the agreement in 2026, then we go into this period of annual reviews. I agree with him, that I don't think we're going to see a renewal in 2026. There are absolutely zero reasons for politicians to do that. And so I do think we're going to be in a world of annual reviews every year for 10 years.
Tony Payan of the Baker Institute then expressed some surprise about these assessments and also some reluctant acceptance:
This is the first time ... that I hear that the renewal of the USMCA is not a given. I thought it was 99%, but now I'm beginning to think, oh-oh, there's a lot of political interests underneath that, and there's a lot of different dates that don't make it politically convenient for renewal.
I was where Tony was on all this. I thought renewal in 2026 was very likely under a Harris administration (less so under Trump, as he would try to extract more concessions), and I was surprised to hear this skepticism. But the more I thought about it, the more I thought the skeptics may very well be right. At the same time, it's hard to say anything with much certainty until we see the results of the 2024 U.S. elections, the 2025 Canadian elections, and how new Mexican President Claudia Sheinbaum governs.
And just to restate my (politically unrealistic) position on all this, I would use the 2026 review process to remove the existing Article 34.7 and replace it with one that involves more frequent reviews (maybe every two years rather than no reviews for the first 6 years) but no automatic termination mechanism (there are separate provisions under which the parties are able to amend the agreement and to withdraw, so there is no need for this termination provision). In addition, on the U.S. domestic side of things, I would make the withdrawal decision a joint one by Congress and the President, with U.S. withdrawal contingent on support from both branches.
