The US has declined to renew the United States-Mexico-Canada Agreement (USMCA) for another 16 years by the mandatory deadline of July 1st 2026. This kicks off a process of annual reviews, the outcome of which remains highly uncertain as talks proceed slowly and diplomatic relations remain tense. The three countries have until 2036 to extend the agreement, so long as no member withdraws from it.
This article summarises EIU’s forecast (baseline and risk scenarios) on the USMCA’s renewal prospects and the economic implications for the three countries.
Renewal later rather than sooner (65% probability—baseline)
Our baseline scenario expects a renewal of the USMCA no earlier than the second half of our 2026‑30 forecast period. This means at mid‑2028, so towards the end of the current US administration, at the very earliest.
The economic implications of the delay will be minimal, so long as current USMCA rules and US tariff exemptions remain in force as renewal talks continue. The most visible negative impact will be on private investment, particularly in Canada and Mexico, with companies continuing their current wait-and-see approach as high levels of trade uncertainty persist for longer.
A renewed USMCA will likely include tighter rules of origin (including higher US content requirements), co‑ordinated tariffs and investment screening vis‑à‑vis China, enhanced border security and greater market access for the US. Reduced US tariffs are also likely, although a drop to the pre‑2025 near‑zero rates appears unrealistic. Some of these provisions may come earlier through piecemeal side agreements, but others (particularly involving rules of origin) may prove difficult to complete via unilateral executive action and could require involvement by the US Congress. Even if some side deals occur quickly, this would not replace an official trilateral renewal of the entire deal, which will inevitably take longer.
Renewal sooner rather than later (25% probability—optimistic)
An alternate, optimistic scenario involves a renewal occurring within the first half of the forecast period, so before mid-2028. Increased political pressure to complete the deal around the upcoming US midterm elections could be one path towards this outcome, but remains unlikely. A relatively quick renewal would mean a slightly brighter economic outlook for the three countries than our baseline assumes.
Terminated agreement (10% probability—pessimistic)
Although there are several ways that the renewal process could yield a terminated USMCA, we still view this as the least likely scenario.
This could occur either by a country exiting the USMCA, the agreement devolving fully into bilateral arrangements or negotiations failing to renew the agreement by the 2036 expiration deadline. A terminated agreement would leave the US, Mexico and Canada all worse off and would mark a significant erosion of North America’s business environment—an outcome that all three governments would want to avoid.
