USMCA update: Don’t expect a comprehensive agreement until at least 2027

The U.S., Mexico and Canada appear increasingly unlikely to finalize an updated and comprehensive trade agreement by the end of 2026. For manufacturing businesses that rely on goods imported between these three countries, this means uncertainty and margin pressures will likely continue into 2027 and beyond.

Keep reading to learn more about the status of USMCA renegotiations, key elements affecting the process and how to take action to protect your business during this era of shifting trade policies.

The USTR has opened a new round of USMCA negotiations

On July 1, 2026, the U.S. notified its trading partners that it would seek annual reviews of USMCA (formerly the U.S.-Mexico-Canada Agreement), rather than the sixteen-year extension that Canada and Mexico sought. The Office of the U.S. Trade Representative (USTR) on October 2, 2026, announced the initiation of the 2027 USMCA review by opening the public consultation process ahead of the joint review by the three parties. The USMCA remains in effect during the review.

USTR is seeking stakeholder comments by January 12, 2027, ahead of a public hearing on:

• Any aspect of the operation or implementation of the USMCA.
• Any issues of compliance with the USMCA.
• Recommendations for specific actions that USTR should propose ahead of the joint review.
• Factors affecting the investment climate in North America and in the territories of each party, as well as the effectiveness of the USMCA in promoting investment that strengthens U.S. competitiveness, productivity and technological leadership.
• Strategies for strengthening North American economic security and competitiveness and cooperation on issues related to non-market policies and practices of other countries.

The Trump administration wants to develop limited frameworks before a comprehensive treaty

The timing of the USTR’s October 2 announcement is significant because it signals that negotiations are not nearing a conclusion as some had hoped. Sources in Washington indicate that the Trump administration is seeking framework agreements in specific areas, possibly by the end of the year. While discussions are further along with Mexico than with Canada, any “framework” reached with either country will likely serve as a template for talks with the other.

Based on conversations with Canadian officials, introducing frameworks at this stage rather than pursuing a comprehensive agreement in 2026 may present challenges. Canada would like an updated USMCA to address all outstanding issues, including the new Section 338 tariffs, the application of Section 232 tariffs to steel, aluminum and copper products, and restoring tariff-free treatment for USMCA-qualifying goods originating in North America.

U.S. tariffs have complicated negotiations between the U.S. and Canada

Negotiations between Ottawa and Washington collapsed hours before the U.S. imposed Section 338 tariffs of 50% on more than 500 Canadian imports on August 22, 2026. Canadian officials have indicated that they will not re-engage in formal USMCA negotiations with the U.S. while the 338 tariffs remain in effect.

In retaliation, on September 8, Canada began imposing tariffs of 15%, 25% or 50% on hundreds of U.S. exports. In response, the U.S. added more Canadian goods to the Section 338 tariff list, effective September 15, and beginning September 29, barred the importation of select Canadian products, including larger motorcycles, whey, molasses and various alcohol products.

A further complicating factor is President Trump’s pledge to increase tariffs on autos and parts to 50% on January 1, 2027. Such action may prompt Canada to further retaliate, leading to an escalation of tensions and possibly complicating negotiations in 2027.

Major disagreements between the U.S. and Mexico also remain unresolved

U.S. and Mexican officials are reportedly making slow but steady progress on a range of topics. However, the most contentious issues over the Section 232 tariffs on steel, aluminum and autos remain unresolved.

Mexico is seeking to eliminate the 50% tariffs on the metals or lower them to 10%, and to remove the 25% tariffs on autos and parts. There is some discussion in Washington, D.C. that the U.S. and Mexico hope to announce agreements on some issues prior to the end of the year, if not by early November, but this would not constitute a full renewal, which requires all three parties.

USMCA trade rules may remain unstable for the foreseeable future

A further indication that negotiations among the U.S., Mexico and Canada will take longer than manufacturers and distributors had hoped came from the chairman of the House Ways and Means Subcommittee on Trade. On September 29, Rep. Adrian Smith stated that the Trump administration is likely to complete a USMCA renewal prior to the end of the president’s current term in office, which remains over two years away.

Continuing negotiations through 2027 and into 2028 will bring continued instability to the North American trading relationship and leave manufacturers and distributors unsure of how rules governing the movement of goods may change.

Action steps for business leaders to navigate trade uncertainty

This uncertain trade environment creates additional margin pressures for manufacturers. Here are practical, high-level action steps to help your business adapt:

1. Monitor ongoing developments in the USMCA negotiations

Appoint someone within your business to monitor USMCA negotiations, as well as other tariff and trade policy updates. This can help you keep up with developments, so you have more time to prepare or adapt.

2. Understand your own costs

Understanding your own costs, like raw materials, is essential to getting a clear sense of how your business could be affected by trade policy changes. Map your supply chain to clarify these costs as much as possible. Doing this can also help you identify areas where you might find efficiencies or need to adjust your costing and quoting strategy.

3. Conduct financial forecasting

Do financial forecasting and scenario planning based on different potential USMCA negotiation outcomes. Consider how your business would need to adapt to a range of scenarios.

4. Prioritize operational efficiency

Operational efficiency can help protect your margins from pressure caused by trade uncertainty. This can be as straightforward as figuring out how to reduce production downtime but can also involve deploying technology to run your business more efficiently as a whole.

5. Use tax incentives to offset margin pressures

Manufacturers are often eligible for tax incentives that can help offset margin pressures. For example, if tariffs have affected your R&D costs, you may be able to claim a larger R&D tax credit, and incentives can also help pay for plant or facilities upgrades you have to make anyway.

Read more

• 9 top tariff mitigation strategies for manufacturing CFOs
• Mid-year tariff update: New Section 301 tariffs, Section 232 and more
• Supply chain risk management: Tariffs, disruptions and more