Picture tourists from Tennessee checking into beach hotels in Cancun. Canadian-made auto parts rolling into factories across the American Midwest. Tequila and mezcal flowing at bars in Seattle. These everyday exchanges reflect just how deeply intertwined the economies of the United States, Canada, and Mexico have become.
The numbers back it up: the United States exchanges $1.9 trillion worth of goods and services with its two neighbors every year — roughly $5 billion every single day. Canada and Mexico have overtaken China as America’s top two trading partners.
That’s why the rules governing trade between the three countries carry enormous weight. And after a year of unpredictable tariff moves from President Donald Trump, businesses on all sides of the border are hungry for stability.
They may be waiting a while.
The regional trade agreement known as the U.S.-Mexico-Canada Agreement, or USMCA — a deal Trump negotiated and championed during his first term — hit its renewal deadline Wednesday. But experts say the process of renegotiating it could stretch on for months, if not longer.
The road ahead is full of obstacles.
“There’s going to be a lot of drama this summer,” said Diego Marroquín Bitar, a fellow in the America’s program at the Center for Strategic and International Studies, speaking last week at a USMCA forum hosted by the Cato Institute.
Among the most divisive issues: the U.S. is pushing demands that could effectively require Canada and Mexico to give up a portion of their auto manufacturing to the United States. While that could bring more factory jobs to American soil, it would also disrupt long-established supply chains and drive up prices on new vehicles — which already average close to $50,000 — at a time when consumers are already struggling with the high cost of living.
Trump has only added to the tension by threatening to walk away from the very agreement he once touted.
The USMCA took effect in 2020, replacing the 1994 North American Free Trade Agreement, which had eliminated most trade barriers between the three countries. Trump and other critics had long argued that NAFTA was a job killer, saying it pushed American companies to relocate factories to Mexico to take advantage of lower wages and then ship products back to the U.S. tax-free.
The USMCA was meant to fix that — requiring higher wages in factories and ensuring that more of what was produced actually originated in North America, partly to prevent Chinese-made goods from sneaking through regional borders duty-free. In practice, though, the new agreement ended up being fairly similar to the old one.
The USMCA included an unusual provision requiring the agreement to be reviewed every six years. Wednesday marked that deadline, but as Oscar Ocampo, director of economic development at the Mexican Institute for Competitiveness, put it: “nothing is going to happen July 1.”
Negotiators could technically agree Wednesday to simply extend the USMCA as-is for another 16 years. But that’s seen as extremely unlikely. Instead, the three countries are expected to keep working on revisions, with a deadline of 2036 to reach a new deal — or the agreement expires altogether.
In the meantime, any of the three member countries can exit the pact by giving the other two six months’ notice. That possibility alarms Canada and Mexico, both of which are heavily dependent on trade with the U.S. — and both of which worry Trump might actually do it.
Trump said in June that he was “not looking to renew” the trade deal with Canada and Mexico. “We don’t need anything that they have,” he said.
Ocampo believes Trump doesn’t truly intend to scrap the treaty, but is instead using the threat of uncertainty to maintain pressure on Mexico over immigration and security concerns.
While the U.S. and Mexico have already held talks on renewing the agreement, Canada has largely been left on the sidelines. Patrick Childress, a partner at the Holland & Knight law firm and a former U.S. trade negotiator, described the risk for Canada this way: “The danger for Canada is this: that the U.S. government and the Mexican government reach agreement on changes to core provisions of the treaty and then show up in Ottawa and say: ‘Here’s what we’ve agreed to. You can take it or leave it.’”
Canadian Prime Minister Mark Carney confirmed that the three countries planned to meet virtually on Wednesday, but offered a telling signal about his expectations, saying: “I’m not looking for my pen.” He later added, in French, that his priority is updating the USMCA and that it would be impossible for the U.S. to reach a new agreement without congressional approval.
On the substance of the negotiations, the U.S. wants a revised agreement that does more to block Chinese goods from entering through indirect routes. But the most heated dispute centers on Washington’s push to require that a greater share of products — particularly cars — be manufactured in North America, and specifically within the United States.
The current USMCA already raised the bar for automotive products, requiring that 75% of a vehicle’s content be made in North America — up from 62.5% under NAFTA — to qualify for duty-free trade. Now the U.S. wants to push that threshold even higher. But automakers have “been finetuning their supply chains for years to be able to hit that 75% mark,” Childress noted, meaning a higher standard would require significant time and investment to meet.
Even more contentious is a new U.S. demand, confirmed by Carney in early June, that 50% of every car sold in the U.S. be manufactured within the United States itself. Currently, no USMCA country is guaranteed a set share of production. “It’s a red line for both Mexico and Canada, and it goes against the spirit and the letter of regional integration,” Ocampo said.
Marcos Carias, an economist at the credit insurer Coface, said only one in five Mexican and Canadian cars imported into the United States would currently meet that 50% threshold. Among the models likely to face higher costs under such a rule, he said, are Ford’s Maverick compact pickup truck, Chevrolet’s mid-size Equinox SUV, and some Nissan sedans — all built in Mexico. His rough calculations suggest prices on the most affected models could climb between 5% and 7%.
For many businesses, the bigger concern isn’t which country makes what — it’s simply knowing what the rules will be. “My interest in this USMCA renewal is just consistency, right?” said Shawn Miller, co-founder of PKGD Group, a Holland, Michigan-based company that imports agave spirits — including tequila, mezcal, and raicilla — from small family producers in Mexico. “If the rules change, the rules change. But we’d really like to know (what they’re going to be) and we’d like them to stay that way for a while.”
Business has been strong for PKGD. Sales are up 62% so far this year, following a 100% surge in 2025 and a 300% jump in 2024. But the past year was anything but smooth.
In February, Trump slapped a 25% tariff on goods from Mexico and Canada, only to reverse course about a month later by exempting products eligible for USMCA’s preferential treatment. The USMCA allows Mexican spirits like those PKGD imports to enter the U.S. duty-free.
During the confusion, three truckloads of Mexican spirits imported by PKGD crossed the border and got hit with the 25% tariff anyway — costing the company $105,000. “For us, it was one unfortunate day!” Miller said.
Uncertain about what might come next, PKGD sat down with its Mexican producers to figure out how to absorb the blow. “What can we absorb? What can they absorb?” Miller said. “How can we mitigate this?” He noted that he and his suppliers “are not large multinational corporations with dedicated trade departments, teams of lawyers, or lobbyists focused on trade policy.”
Kerry Mellin knows that feeling well. In 2014, the veteran Hollywood costume designer launched a business in Ventura County, California, selling silicone grip aids designed to help people with disabilities — including those with cerebral palsy and Parkinson’s disease — hold everyday objects like spoons, cups, pens, and toothbrushes.
But when she tried to expand her EazyHold grips into Canada, where she holds dual citizenship, sales stalled. She believes the problem is that the silicone she imports from Asia kept her product from having enough North American content to qualify for USMCA’s duty-free treatment when crossing the border from the U.S.
Mellin suspects her product could meet the USMCA standards, “but the rules are complex and unpredictable enough that I genuinely can’t be sure without hiring a trade attorney.”
She argues the USMCA’s rules of origin should be made more flexible, not stricter, to give small businesses that can’t afford pricier North American raw materials a fighting chance.
“I do understand why the rule exists — to stop companies from routing Chinese goods through Mexico,” she said. “I just wish it could tell the difference between that and a small family business in California making grip aids for people who can’t hold a fork. I’m not the problem they were trying to solve.”
