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The U.S. declined to renew the United States-Mexico-Canada Agreement (USMCA) on free trade. Learn what happens next, and what it means for your business.

USMCA Not Renewed: What You Need to Know

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July 1, 2026, was the deadline for the United States, Canada, and Mexico to agree to extend the USMCA free trade deal that came into force in 2020 for a 16-year term through 2042. The United States declined to renew, meaning the three countries will enter a period of negotiations and annual reviews, with the agreement set to expire in 2036 unless the three countries reach an extension. For now, the agreement and all its rules stay in place, with the potential for extension at any time should renegotiations meet the needs of all three sides. But any party can also withdraw from the agreement at any time, with six months’ notice.

Nothing changes for North American importers and exporters in the short term. The USMCA is still in place, meaning goods that crossed the border tariff-free on June 30 still do so today, if they continue to qualify. Current tariff and surtax exemptions also remain in place, including those on steel, aluminum, automobiles and auto parts. However, the uncertainty does represent risk for importers, especially when it comes to long-term planning. Bilateral side letters between the parties could be reached, adding complexity; annual reviews mean new rules could be introduced each year for different parts of the agreement; and renegotiation could potentially see stricter rules of origin and regional content requirements.

USMCA Terms You Need to Know

USMCA

Sunset Clause

Rules of Origin

Side Letters

The United States-Mexico-Canada Agreement (USMCA, also known as CUSMA in Canada and T-MEC in Mexico) is the continent-wide trade deal that replaced the North American Free Trade Agreement (NAFTA). It focuses on promoting fair trade, strengthening labor standards, enhancing digital trade, while providing tariff-free access to certain goods. It came into force on July 1, 2020, and is set to expire in July 2036.

USMCA

The criteria that determine where a product is from or manufactured. Meeting these rules qualify goods for tariff-free treatment under the USMCA, typically with minimum thresholds for how much of a product must be made in North America. The current USMCA rules of origin remain in place.

Rules of Origin

Side letters are a tool that any one of the three countries can use to clarify bilateral matters between it and one of the other countries, without impacting the third country. More bilateral negotiations between the three parties are expected, meaning side letters may become an important tool in reaching a future USMCA renewal or extension.

Side Letters

The USMCA’s joint review and expiration process is also referred to as a “sunset clause.” All three countries were required to confirm their desire to continue the agreement by July 1, 2026; Canada and Mexico wished to extend, however, the U.S. declined. As a result, the agreement will “wind down” towards its 2036 expiration. However, annual reviews provide a chance to renew or renegotiate.

Sunset Clause

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Tariff Rate Quota

Tariff rate quotas serve as thresholds for the quantity of a product that can be imported tariff-free or at a reduced tariff rate. Once that threshold is reached, additional imports are subject to a higher tariff rate. This will be a particularly important point in the U.S.’s negotiation with Canada over access to Canada’s dairy market.

Tariff Rate Quota

As of December 2025, certain steel derivative goods imported into Canada are subject to a surtax. However, a Remission Order has been issued, with guidance provided in Customs Notice 26-07, that can be applied to reduce the surtax paid, provided the goods meet the remission conditions or the conditions of the remission order. Should the Remission Order apply, importers can make a retroactive claim to have the surtax refunded on previous imports, provided the claim is filed within two years of importation.

Steel Derivative Surtax Refund

A Remission Order allows for the relief or refund of customs duties, taxes, or surtaxes in specific circumstances or conditions. These orders help mitigate the cost and impact of certain trade actions or geopolitical concerns, such as retaliatory tariffs, on Canadian businesses. A Remission Order could apply retroactively, depending on the circumstances, allowing importers to make claims on duties already paid, provided the claim is filed within two years of importation.

Remission Order

Country of origin, tariff classification, and valuation are the three key data elements of customs compliance. Accurately assessing these elements will ensure you pay the correct duty amounts, mitigating the risk of a customs audit or penalty. You can also retroactively re-assess and correct these elements, which may result in a refund of duties paid (but may also result in additional duties being owed).

Origin, Classification, and Valuation

Importers can request a refund of customs duties paid to CBSA if it is determined that duties were paid in error or overpaid due to number of specific circumstances, including incorrect country of origin determination, tariff classification, or valuation, or if the goods are deemed eligible for preferential tariff treatment under a free trade agreement (but no claim was made at time of importation).

Duty Refund or Recovery

Canada Border Services Agency (CBSA) program that refunds duties paid on imported commercial goods when those goods are later exported either in their original state or after use in exported manufacturing, or if they are surplus or obsolete and to be destroyed. Drawback effectively removes the domestic duty cost from goods that ultimately leave Canada.

Duty Drawback

Steel Derivative Surtax Refund

Remission Order

Origin, Classification, and Valuation

Duty Refund or Recovery

Duty Drawback

Key Canadian Duty Refund-Related Terms You Need to Know

U.S.

Canada

Key U.S. Duty Refund-Related Terms You Need to Know

Key Canadian Duty Refund-Related Terms You Need to Know

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Common USMCA Questions Answered

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USMCA was not renewed on July 1. What’s next?

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The USMCA remains in place until 2036, unless one of the three countries decides to withdraw (requires six months’ notice). The three sides will review the agreement annually and meet regularly to discuss their positions, renegotiate, and potentially renew.

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If your goods met USMCA rules of origin and traded tariff-free on June 30, they still do today. (The tariff landscape, including tariffs on steel, automotive parts, and lumber, is also the same.) In other words, your immediate costs shouldn't shift – but that could change on an annual basis, depending on how the reviews and negotiations go.

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How does this affect my imports?

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Possibly. Representatives from Canada and the U.S. have both indicated they expect bilateral deals will come into play alongside the trilateral USMCA framework. These could take the form of side letters or additional chapters added to the original agreement. The U.S. and Mexico have already entered discussions, but Canada and the U.S., and Canada and Mexico, have yet to hold formal USMCA discussions.

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Are more bilateral agreements coming?

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The U.S. is looking for greater access to the Canadian dairy market and for Canada to permanently discard its Digital Services Tax; in Mexico, the U.S. is seeking greater access to energy markets and improved adherence to the USMCA’s labor provisions. The U.S. is also concerned about Chinese manufacturing moving into Mexico, and Chinese imports entering the U.S. through Canada.

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What issues is the U.S. looking to negotiate?

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Yes. In the U.S., importers must file refund claims (protests) within 180 days of liquidation. In Canada, most claims must be filed within four years of the goods being accounted for. However, different timelines may apply, depending on the specific type of refund claim; always check with the applicable customs agency before applying for a refund.

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Are there deadlines for filing a claim?

USMCA-compliant goods keep their reduced tariff or tariff-free status. Your day-to-day import costs won’t change.

The Status Quo Holds

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The annual review process offers a chance for each side to renegotiate. Small changes could be coming annually – or things may stay the same. Keep an eye out ahead of each July to see where things stand.

Prepare for Uncertainty

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The U.S. is currently negotiating separately with Canada and Mexico, not as one trilateral group, with Mexico further along in formal talks. The outcomes may reshape the costs of moving goods.

Bilateral Deals May be Coming

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4 Key Takeaways

If the three countries don't reach an extension, the USMCA expires on July 1, 2036.

The Clock Runs out in ‘36

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The USMCA isn’t going anywhere. For now. Well, kind of.

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