As trade negotiations between the United States and its closest neighbors have grown increasingly fraught with tensions, President Donald Trump has indicated that he plans to withhold a U.S. commitment to the signature North American trade pact he negotiated during his first term.

The president has long sounded an alarm about the United States’ persistent trade deficits with most countries, including Mexico and Canada. During his first term, Trump renegotiated the longstanding North American Free Trade Agreement, or NAFTA, between the U.S. and the two countries, replacing it with the United States-Mexico-Canada Agreement, or USMCA.

“The USMCA is the largest, fairest, most balanced and modern trade agreement ever achieved,” the president said in January 2020. “There’s never been anything like it.”

But Trump now says he plans to withhold the U.S. commitment to the pact by the July 1 deadline, by which the signatories must either indicate an intention to renew their commitment or begin a 10-year process of winding down the pact. During the 10-year period, the United States could negotiate terms of the trade agreement with Mexico and Canada.

“I’m not looking to renew it,” Trump told reporters earlier this week, expressing frustration at the results from the renegotiated deal.

“You know, with Mexico and Canada, we have trade deficits,” he said. “We should have surpluses with them. We don’t need their cars. We don’t need their lumber. We don’t need their energy. We don’t need anything that they have.”

If the three countries agree to extend the pact by the July deadline, it would be extended for 16 years. However, by withholding the United States’ approval, Trump would trigger a period of rolling reviews of the USMCA until it would officially expire in 2036.

Escalating trade tensions, especially between the United States and Canada, appear to have undermined Trump’s support for the pact.

He began his second term in 2025 by imposing 25% tariffs on most Canadian and Mexican imports, citing the cross-border flow of fentanyl and illegal immigration, while carving out USMCA-compliant goods from the levies. However, Canada and Mexico responded differently.

Mexican President Claudia Sheinbaum chose to accommodate American demands by cooperating on trade negotiations, boosting security cooperation with the United States to combat Mexican drug cartels and imposing its own tariffs on other countries to reduce Mexico’s attractiveness as a pass-through for cheap goods to the U.S. market.

However, Canada immediately escalated, imposing retaliatory tariffs. Though Mexico had also initially retaliated, Canada faced higher rates, ultimately a 35% U.S. tariff rate on non-USMCA goods.

Unlike Mexico, which sought to accommodate U.S. demands and expand cooperation in other areas, Canada’s newly elected prime minister, Mark Carney, has attempted to pivot his country away from the United States and is actively courting China, India and European partners to reduce dependence on American markets.

Canada’s outreach to Beijing, in particular, has rankled the Trump administration. In January, Carney visited China and negotiated a new “strategic partnership” with the Communist regime, promising to expand trade and mutual investment.

Carney said the new deal, which represented Canada “recalibrating” its relationship with China, would set up the country for the “new world order,” one in which the United States’ ally would try to distance itself from its southern neighbor, Just the News previously reported.

In addition to concerns over Carney’s new initiatives with China, the Trump administration has raised concerns over dairy market access and softwood lumber, a lack of cooperation on fentanyl and other drug trafficking and Canada’s Digital Services Tax on U.S. technology companies.

But for the American president, that is not enough. Trump wants to reduce the United States’ trade deficit with Canada and Mexico even further.

In 2025, the U.S. goods trade deficit with Mexico was $196.9 billion – a 14.8% increase ($25.4 billion) over 2024, according to the Office of the U.S. Trade Representative. As tensions and tariff barriers rose, the goods trade deficit with Canada in fact fell more than 25% – about $15.5 billion – in 2025 to $46.4 billion.

Another factor in Trump’s calculus is likely the Supreme Court’s ruling earlier this year in Learning Resources, Inc. v. Trump that slapped down his ability to impose sweeping tariffs under the International Emergency Economic Powers Act that made up the bulk of the duties he implemented for trade with both Mexico and Canada.

The ruling appears to have compressed the negotiating timeline and made a clean July 1 extension of the USMCA increasingly unlikely. In fact, only Mexico is currently engaged in formal negotiations with the Trump administration over bilateral trade. Canadian and U.S. officials have held preliminary discussions, but no formal negotiations have started.

Since the USMCA came into effect in 2020, trade between the signatories has grown 37%, driven by investments in the industrial supplies and automotive sectors. Mexico and Canada remain the top-two trading partners of the United States, according to the most recent U.S. government data.

The vast majority of Americans, 75%, also believe that the USMCA agreement has been good for the U.S. economy, according to a poll by the Chicago Council of Global Affairs and Ipsos.

In addition, the poll showed Americans also demonstrated an overwhelming belief that trade with Canada and Mexico benefits U.S. national security.

Since the Automotive Products Trade Agreement of 1965 with Canada and NAFTA, which folded in Mexico in 1994, the vehicle manufacturing industry in North America has become highly integrated. Industry associations argue that this has been a net benefit for the industry.

For example, the American Automotive Policy Council called the USCMA “the most vital trade agreement for America’s automakers,” and asked the Trump administration to preserve the pact, even if it renegotiates some components.

Other sectors that may face uncertainty if the USMCA is called into question include agriculture and food products, textiles, and cross-border capital investments.

Experts have also raised concerns that a weakening of the trade relationships between the United States, Canada and Mexico could open the door for China to increase its penetration of North American markets. The USMCA regime includes rules-of-origin standards which prevent Beijing from using Mexican or Canadian re-export as a tariff workaround.

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