USMCA trade deal review begins July 1

The trade agreement between the United States, Mexico and Canada reaches its first mandatory joint review on July 1. If the three countries do not agree to a full extension, the deal would move to annual reviews through 2036. Officials from Canada and Mexico have stated they want the agreement to continue, while U.S. statements have expressed openness to negotiation alongside indications that renewal is not assured.

Review process and possible outcomes An annual review process would require repeated negotiations and could affect long-term business planning, according to analysts cited in the coverage. In the most negative scenario, any party could give six months' notice to terminate the agreement entirely.

Goods traded under the agreement have been largely exempt from certain tariffs imposed last year. However, additional duties have still been applied to some USMCA-compliant products through other legal authorities, including 50 percent tariffs on Canadian steel, aluminum and copper, and 25 percent tariffs on non-U.S. content in qualifying automobiles.

Trade volumes and state-level exposure Data from the Peterson Institute for International Economics shows that several U.S. states send a majority of their exports to Canada and Mexico under the agreement. North Dakota shipped 89.9 percent of its goods to the two countries last year, while Michigan recorded 64.9 percent, Iowa 50 percent and Arizona 39 percent.

Automotive parts, aircraft and petroleum products accounted for more than $10 billion in U.S. sales to Canada and Mexico. Termination of the pact could allow broader tariff application and potential retaliation by the other two countries. Canada has indicated it will seek tariff relief during the review, citing the importance of reduced duties for its economic outlook.