The United States, Mexico, and Canada approached the first review deadline for the U.S.-Mexico-Canada Agreement this week. Policymakers faced a straightforward choice. Either extend the agreement and preserve at least some semblance of stability in North American trade, or open the door to years of economic uncertainty and potentially higher tariffs.
President Donald Trump has decided against a clean extension, which may come as no surprise. Given this administration’s track record on trade, he has chosen to allow the bloc of countries to enter a prolonged period of annual reviews, renegotiations, and, possibly, a shift to bilateral deals.
No matter what theater may follow this decision, failure to extend USMCA would be a mistake. Though disagreements exist, USMCA deserves to remain at the center of our three nations’ economic relationship.
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There are four reasons why.
First, USMCA supports millions of jobs and is deeply integrated into the U.S. economy. In 2024 alone, trade between the U.S., Canada, and Mexico exceeded $1.8 trillion in goods and services. Some estimates find that 2 million American jobs are directly supported by trade with Canada and Mexico.
USMCA, additionally, was a needed upgrade to a trade framework that was drafted prior to the rise of the digital economy, an upgrade shepherded by Trump no less. The Clinton-era NAFTA, though revolutionary and forward thinking, was written in the 1990s, remained largely untouched, and mostly focused on goods tariff reduction.
The USMCA addressed new possible trade barriers by ensuring that businesses can move data freely across borders, preventing discriminatory treatment of digital products, and protecting proprietary algorithms and source code from forced technology transfer. Those provisions are increasingly important as digital trade becomes a larger share of how our businesses buy and sell products.
Third, and arguably most important, is certainty. Since 2025, importers and exporters have had to navigate multiple rounds of tariff announcements, delays, exemptions, court rulings, and replacement measures, all from Trump’s trade war. According to Tax Foundation calculations, the president changed his tariff policy more than 50 times in his first year back in office.
To be sure, not every tariff announcement from this White House focused solely on Canada and Mexico. But a sizable reason the economic damage has been less severe than it otherwise might have been is that USMCA-compliant imports have largely remained exempt from many of the administration’s tariffs.
Business activity is proof of that. The share of imports entering under USMCA preferences rose dramatically, climbing from 44% in 2024 to more than 80% in 2026.
Lastly, allowing USMCA to expire would function as a major tax increase on Americans. Tax Foundation modeling finds that ending USMCA tariff protections could result in a roughly $466 billion tax increase between 2027 and 2036, assuming that Trump follows through with his 10% universal tariffs under Section 301. American households would foot the bill, equivalent to about $300 per household in 2027. U.S. output would decrease by 0.1%, and hours worked would fall by the equivalent of 95,000 full-time jobs.
USMCA is by no means perfect. Differences in where countries want to go do exist — spanning rules of origin and even enforcement provisions. But grievances can be ironed out while still providing certainty for U.S. consumers and producers. No single issue is worth jeopardizing the entire agreement.
These review systems, in fact, were in place to keep USMCA current, not to create recurring uncertainty over whether the trilateral relationship will survive. As drafted, USMCA only has a life of 16 years.
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Since no deal was reached on July 1, the reviews will now shift from occasional to annual. Allowing this to occur carries risks. Businesses making long-term investments need predictability. Workers need confidence that the products they’re making will still have customers. In an economy still reeling from high inflation, consumers need savings anywhere they can get them.
Entering into a yearly review process is not an ideal outcome, but since this is the path the administration has chosen, policymakers should shift their focus toward preserving what has worked. Extending USMCA would strengthen competitiveness, reduce uncertainty, and prevent costly new trade barriers. At a time when economic confidence is fragile, extending USMCA can keep certainty in play for millions of American workers.
Alex Durante is a Senior Economist at the Tax Foundation.