Don’t Let the USMCA Drift Away

President Trump says the United States would do better without the United States-Mexico-Canada Agreement (USMCA). On July 1, the three countries are set to begin the agreement’s first formal review. The pact does not expire that day; July 1 only starts the clock, toward either a 16-year renewal or a slow countdown to termination. The real question is whether the review ends quickly or drags on for years. The greatest threat to North American competitiveness isn’t withdrawal. It’s uncertainty.

North America builds things together. When a supplier in Mexico cannot deliver wiring harnesses, layoffs appear in Toledo and Spring Hill. When Canadian aluminum is late, an aerospace plant in Wichita, Kansas, burns through overtime to catch up. This is how cars, planes, and medical devices are built now: across borders. Rather than a weakness to be unwound, this integration is the closest thing the United States has to a secure allied industrial base. Pulling that production home would take years and cost more than it could ever earn back. The USMCA holds it together, and that is precisely what is now in question. Capital is patient, but it is not fond of ambiguity, and the wait is already pulling growth out of all three economies.

When the opening round of negotiations began this spring in Mexico City, the most revealing detail was on the calendar, not in the communiqués. The United States and Mexico opened talks bilaterally, without Canada, and a third round is already set for July 20. So much for a clean extension by July 1. The U.S. demands are far-reaching: a 50 percent U.S.-content floor for autos, tighter rules of origin, and harder limits on Chinese inputs. A deal could still come quickly. Until it does, uncertainty remains a tax on investment.

More than 13 million U.S. jobs depend on commerce with Canada and Mexico, and U.S. manufacturers sell more made-in-America goods to those two markets than to the next 12 largest combined. Business groups across all 50 states have urged Washington to extend the agreement, and with reason: Canada and Mexico are the top export markets for more than 100,000 small and midsize U.S. firms. What worries businesses is not the review, which the agreement built in by design, nor even its eventual outcome, but the grind of the process itself: a negotiation that drags on without resolution. That alone is already chilling the investment and hiring the deal was meant to secure.

Despite the deficit rhetoric, the USMCA is about coproduction, not one-way imports. About 74 cents of every dollar of Mexican manufactured goods sold to the United States was made within North America, combining U.S., Canadian, and Mexican content shipped across borders and built in before the product returns. That is why the headline deficit misleads. The full value of a Mexican good is logged as an import, even though close to a third of it is U.S. content heading home. These are not imports competing with U.S. workers, but the output of a single production system built over three decades.

The agreement has also shown that integration need not lower standards. Its Rapid Response Mechanism has been used more than 30 times to enforce workers’ rights at Mexican facilities, raising wages and strengthening collective bargaining across the supply chain.

Consider last year. In the first half of 2025, Mexico’s auto sector shed roughly 329,000 jobs, its first contraction since the pandemic, as tariff uncertainty and soft demand forced plants to throttle back. Canada slid into a technical recession. The United States posted its weakest job growth since 2020. Trade policy is not the only force at work, but the losses fall on both sides of the border at once, because the supply chains run through the entire continent.

The same pattern reaches the checkout line. By April 2025, retail prices for fresh tomatoes were roughly 50 percent higher than a year earlier, according to the Department of Agriculture. The United States had scrapped a decades-old agreement with Mexico and imposed duties on the tomatoes that make up two-thirds of the supply that Americans eat. This is a separate fight from the USMCA, but it shows what abandoning open North American trade looks like on a grocery receipt.

This is erosion, not collapse, and that is precisely why it is underestimated. Left unaddressed, the agreement would not vanish overnight. Firms would keep delaying expansion, hedging, steering investment elsewhere. The damage would show up less as sudden decline than as absence: investment that never arrives, supply chains that settle elsewhere, and a coproduction system that slowly stops working as one.

The timing could hardly be worse. China continues to fuse state power with manufacturing scale. The president’s own tariffs have narrowed the channels through which goods reach the U.S. market on preferential terms. In practice, the USMCA is the only framework still offering predictable, preferential access at scale, provided the rules are met.

The United States does not need to choose between economic security and competitiveness. North America already provides both. The right outcome is an early extension paired with targeted improvements on issues the original agreement largely left untouched, including critical minerals and supply chain security. None of that guarantees prosperity. But letting it erode would forfeit, by sheer inattention, the one structural advantage that U.S. rivals are spending heavily to replicate. At a moment when China is racing to extend its manufacturing reach, North America already holds the strongest economic fortress in the world. To squander it now, by neglect rather than choice, would be the costliest kind of mistake.

Diego Marroquín Bitar is a fellow in the Americas Program at the Center for Strategic and International Studies in Washington, D.C.