On July 1, 2026, the U.S., Canada, and Mexico held USMCA's first mandatory six-year review. The United States declined to extend the agreement for another 16 years, even though Canada and Mexico confirmed they wanted to. USMCA has not lapsed; it still runs through 2036. Without that renewal, the three countries now review the pact every year, and the terms on the table are substantial — including higher U.S. content rules for vehicles, which Mexico has called a non-starter, plus demands tied to the U.S. trade deficit in steel, aluminum, and autos.
On August 22, 50% tariffs took effect on a range of Canadian goods, including wine, cement, and hockey sticks. Unlike earlier measures, these duties apply even to USMCA-compliant products.
Layer in the Supreme Court's February 20, 2026 ruling that IEEPA does not authorize the President to impose tariffs — which struck down the earlier "fentanyl" tariffs on Canada and Mexico alongside the broader reciprocal tariffs — and the legal ground under all of this is still shifting.
None of this is a China story. But plenty of buyers spent the past few years treating Mexico as the exit ramp from China exposure. If North American trade terms are themselves unsettled, "move it to Mexico" stops being the automatically safer bet it looked like a year ago. The steadier strategy right now is verified diversification, not a single substitute country.