The United States-Mexico-Canada Agreement (USMCA) will undergo its first mandatory review in July 2026. Representing up to 30 percent of the global GDP, the agreement could be significantly reshaped and have practical consequences across the Americas, particularly given the rising economic and political competition in the region between the US and China. In this article, Oscar Medelius-Marsano and Christopher Lindrud assess some of the changes that could be tabled in July.
Background to USMCAIn recent years, trade agreements have evolved from primarily economic instruments to strategic tools that define ideological battle lines and serve national security interests. Under this premise, US President Donald Trump’s second term administration has enacted economic policies aimed at addressing perceived security threats across the region, including counterbalancing China’s increased political and economic influence in Mexico, Canada, and the wider Latin America region. Via free trade agreements and direct investments in the last two decades, China has risen to become a top trading partner for Latin America, where it registers a trade volume of more than half a trillion dollars annually, as well as a key player across strategic industries.
Against the backdrop of China’s growth, the US has leveraged regional partnerships to strengthen its economic and trade positioning. In particular, the US has focused on its relationships with Mexico and Canada via the tripartite United States-Mexico-Canada Agreement (USMCA), formerly the North American Free Trade Agreement (NAFTA) between 1994 and 2020, which represents roughly 500 million people and 30 percent of the global GDP and is up for a mandatory review on July 1, 2026.
In 2018, President Trump criticized NAFTA as “the worst trade deal ever made” and claimed that China’s trade policies had negatively impacted US manufacturing and employment. The Trump administration subsequently replaced NAFTA in 2020 and rechristened it as the USMCA under an “America First” banner, foreshadowing a more robust stance in trade policies across the region amid increasing competition with China and Russia, both of which have leveraged significant US foreign aid cutbacks to Latin America since Trump’s first term.
The USMCA not only aimed to increase collaboration and stronger economic cohesion between the US, Canada, and Mexico, but also insulate these economies from increased Chinese influence.''
The USMCA was updated to include stricter labor standards and heightened intellectual property protections, fortified rules of origin in the automotive sector, higher wages and the permissibility of unionization efforts, and easier market access among its members. Through these initiatives, the USMCA not only aimed to increase collaboration and stronger economic cohesion between the US, Canada, and Mexico, but also insulate these economies from increased Chinese influence.
Concurrently, the Trump administration has taken decisive steps to cement its regional geopolitical influence in key jurisdictions, including a USD 20 billion currency swap deal with Argentina in 2025, and the military and intelligence operations with Venezuela and Mexico that led to the detention of former Venezuelan president Nicolás Maduro and death of Mexican drug lord Nemesio Oseguera Cervantes, or ‘El Mencho.’
The renegotiation of the USMCA
In July 2026, the governments of the US, Mexico, and Canada will review the USMCA for the first time since it came into effect in July 2020. The mandatory review period will allow the governments to renegotiate specific provisions, add new language to existing ones, or terminate the agreement altogether, although the third scenario is less likely to occur.
The review comes during a time of rising geopolitical and economic tension between the US and China, marked by a slew of retaliatory tariffs in the last year and Beijing’s increased economic expansion across the region, notably through recent investments in the automotive, manufacturing, energy, mining, telecommunications, and logistics sectors in Mexico, Panama, Argentina, Venezuela, Chile, Brazil, and Peru. Notably, in November 2024, Chinese state-owned terminal operator China COSCO Shipping Corporation Limited inaugurated the Port of Chancay, a USD 1.3 billion deep water port in Chancay, Peru, while government-backed Chinese mining companies Zijin Mining Group Ltd and Ganfeng Lithium Co Ltd have invested more than USD 3.2 billion in Argentina’s lithium sector since 2020.
The review comes during a time of rising geopolitical and economic tension between the US and China, marked by a slew of retaliatory tariffs in the last year and Beijing’s increased economic expansion across the region.''
Similarly, rising tensions between the US and Canada – particularly as the latter recently signed a significant deal with China allowing up to 49,000 Chinese electric vehicles to enter the Canadian market at a 6-percent tariff – could also contribute to the passage of certain USMCA modifications.
Recent comments by public officials and legislators in the US, Mexico, and Canada have suggested that a primary theme surrounding the discussions will be China’s growing political and economic influence in the wider Americas region. Just last month, a senior White House trade advisor claimed that the USMCA has “significant flaws” and is in a “troubling” state because it has allowed China to evade tariffs by manufacturing goods in Mexico and Canada that are then exported to the US. Meanwhile, Canadian Prime Minister Mark Carney has claimed that the USMCA will undergo a “robust” review. Similarly, US Secretary of State Marco Rubio has emphasized that, in the context of China’s growing influence in the region, the USMCA must be revamped to better protect US economic and national security interests, including its broader agenda to combat cartels and drug trafficking.
Potential changes and implications
While the scope and process of the joint review remain unclear, trade analysts and political experts have speculated that the negotiations will focus on stronger rules of origin, labor enforcement mechanisms, and industry-specific provisions in the telecommunications, logistics, energy, automotive, and technology sectors. In September 2025, US legislators introduced the Protecting the USMCA from Harmful Chinese Investment Act to prioritize foreign investment screening against alleged “harmful” Chinese investments in the US, Canada, and Mexico. These measures are designed to counter China’s use of export restrictions, price manipulation, and supply control in the global minerals market by creating a unified North American front under the USMCA.
Notably, the bill also calls for the USMCA to establish regulatory and legislative frameworks in Canada and Mexico akin to the Committee on Foreign Investment in the United States (CFIUS). Under CFIUS, foreign investments are scrutinized through a national security lens, with particular attention to beneficial ownership and possible state influence in private entities. Canada’s Investment Canada Act (ICA) operates in a similar fashion, while Mexico currently does not have a similar framework in place, raising concerns from the US that certain Chinese investments easily enter the regional bloc without much scrutiny. Together with a potential standardization of CFIUS-like frameworks in Canada and Mexico, a revamp of the USMCA could effectively make it a strong tool to curb China’s economic and political influence within and outside USMCA member states.
Stakeholders in the region must remain vigilant and prepare for any potential changes to their regulatory, due diligence, and compliance requirements, particularly as there is no precedent regarding the practical effects of USMCA review periods.''
Conclusion
More than a vehicle for economic integration in North America, the USMCA could also transform into a powerful geopolitical tool with far-reaching implications across the Americas. Outside of the potential geopolitical implications and motivations behind a potential update of the USMCA, stakeholders in the region must remain vigilant and prepare for any potential changes to their regulatory, due diligence, and compliance requirements, particularly as there is no precedent regarding the practical effects of USMCA review periods. At a minimum, these changes may include a heavier scrutiny of their ownership structures, internal controls, origin documentation, and potential exposure to Chinese state-linked entities.
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