The United States declined to renew the US-Mexico-Canada Agreement for a further 16 years at the 1 July deadline, activating a mechanism that subjects the trilateral trade pact to annual reviews for the next decade. The immediate market reaction was muted—the Mexican peso held steady—but S&P Global Ratings warned the same week that a prolonged negotiation period would sustain investor uncertainty and contribute to sluggish economic expansion, cutting its 2026 GDP growth forecast for Mexico to around 1 percent.

Under Article 34.7 of the USMCA, the absence of unanimous renewal does not terminate the accord. Instead, the treaty remains in force in its current form, with yearly reviews focused on compliance rather than renegotiation of the text. Any party may still withdraw with six months’ notice, a possibility that has existed since the pact’s 2020 entry into force. Mexican officials, including Economy Secretary Marcelo Ebrard, had signalled well in advance that this was the most likely outcome, a communications effort that, viewed from Mexico City, prevented the kind of sudden repricing of financial assets that might otherwise have occurred.

The US stance, analysts in Washington note, is driven by both geopolitical leverage and domestic politics. Maintaining annual uncertainty strengthens the administration’s hand in parallel talks on security, migration, and curbing Chinese transshipment, while appealing to voters sceptical of free trade ahead of midterm elections. In Canada, the decision is seen less as a rupture than as a continuation of the volatility that has marked trade relations since President Trump’s return. Ottawa, now under a majority government led by Mark Carney, views its negotiating position as stronger, buoyed by trade diversification and the US administration’s declining popularity. Mexican President Claudia Sheinbaum described the move as consistent with protectionist US policy, not linked to bilateral security matters.

S&P cautioned that the combination of low growth and fiscal rigidity could lead to a sovereign downgrade within 24 months if deficits are not reduced. The rating agency nonetheless considers a breakdown of the commercial relationship unlikely, given the depth of economic integration. Sectoral pressures are already visible: US cattle producers, facing the lowest herd numbers in decades, are pushing for tariff-rate quotas on beef, a demand Mexico has publicly rejected. Analysts tracking agricultural trade note that any tightening of rules of origin could shift beef supply chains, potentially benefiting exporters in Brazil, Australia, and Argentina. The next milestone is a bilateral US-Mexico meeting scheduled for the week of 20 July in Mexico City, where agricultural access and supply-chain rules are expected to dominate the agenda.