The Trump administration announced Wednesday that the U.S. government does not intend to renew a trilateral trade deal with Mexico and Canada that governs nearly $2 trillion in annual commerce.
President Donald Trump wants to replace the U.S.-Mexico-Canada Agreement with separate treaties with each of the trading partners.
The announcement starts a 10-year countdown to the treaty’s expiration date unless the three countries can resolve their differences.
“The United States did not agree to renew the USMCA in its current form,” U.S. Trade Representative Jamieson Greer said in a statement. “As a result, the USMCA is not renewed. The United States will continue to engage with Mexico and Canada to address the agreement’s shortcomings and our trade deficits with these countries.”
The announcement coincides with the July 1 deadline for a joint review of the U.S.-Mexico-Canada Agreement to update the six-year-old treaty.
President Trump has said that one of his primary objections is that the USMCA could open a back door for Chinese competitors against U.S. manufacturers.
He wants stricter “rules of origin,” which refers to regulations that dictate what percentage of a product’s components must be made within North America.
Mexico has been importing Chinese components for its booming automobile manufacturing industry. Many of the vehicles are exported into the United States on behalf of American automakers without tariffs because of the USMCA.
The Trump administration is demanding that vehicles built for the American market must contain at least 50% U.S. content.
U.S. factories that make vehicles and auto parts have lost more than 21,000 jobs since the USMCA took effect. It replaced the North American Free Trade Agreement.
Another source of dispute is Mexico’s recent energy policy reforms. They favor its state-owned oil and gas enterprises over foreign private investors, which prompted complaints from the United States and Canada.
Despite the Trump administration’s announcement, the USMCA remains in effect.