President Donald Trump’s decision to move away from an automatic renewal of the United States-Mexico-Canada Agreement (USMCA) has thrown the future of North American trade into uncertainty, raising questions about what the shift could mean for American consumers.
U.S. Trade Representative Jamieson Greer said on Wednesday that while the administration will not renew the USMCA in its current form, the agreement will remain “in force pending resolution of these issues or until the Agreement’s termination.”
“The United States will continue to engage with Mexico and Canada to address the Agreement’s shortcomings and our trade deficits with these countries,” he said.
Canada had urged the U.S. and Mexico to renew the trade pact for another 16 years after it ends in 2036, before the July 1 deadline. The Trump administration’s refusal to do so means the pact will now go into an automatic annual review mechanism for the next ten years as the members negotiate.
The move does not immediately end the trade deal, but it creates a period of uncertainty for businesses that rely on the agreement’s rules. For shoppers, the biggest question is whether that uncertainty will eventually translate into higher prices for everyday goods—from groceries to automobiles.
The U.S. and Mexico are scheduled to meet for a third round of bilateral negotiations in Mexico City during the week of July 20, though formal talks with Canada have not yet been scheduled.
Last month, Trump had suggested he did not want to renew the deal, saying, “I made the deal and the primary reason I made the deal is that NAFTA was the worst trade deal I’ve ever seen. Yeah. And I made it better.
“But I had the right to terminate,” the president added, referring to the prior North American Free Trade Agreement.
Industry leaders and trade experts have urged the U.S., Mexico and Canada to work together to urgently extend the agreement to avoid uncertainty and potentially higher prices for consumers on grocery items, cars and more.
How Grocery Bills and Car Prices Could Change
The USMCA has helped create a deeply integrated North American economy, with goods crossing the U.S., Canadian, and Mexican borders every day before reaching consumers.
For grocery shoppers, Mexico’s role as a major supplier of fresh produce means any disruption to trade could have an impact on prices. Products such as tomatoes, avocados, berries, peppers, and other fruits and vegetables are heavily dependent on cross-border supply chains.
Economists warn that if new tariffs or trade barriers are introduced, businesses may pass some of those added costs through the supply chain, potentially resulting in higher prices for consumers.
Cars could face similar uncertainty. The North American auto industry relies on parts moving between the three countries multiple times during production. New tariffs or changes to trade rules could increase manufacturing costs, potentially affecting the price of new vehicles, replacement parts, and repairs.
Industry groups have long warned that disruption to USMCA rules could make it harder for companies to plan investments and manage supply chains.
Industry Leaders and Experts Speak Out
Chad P. Bown, former Chief Economist at the U.S. Department of State under Joe Biden, and Reginald Jones Senior Fellow at the Peterson Institute for International Economics, told Newsweek that one of the main motivators behind Trump’s decision not to automatically renew the agreement, was to prevent Chinese-made components or Chinese investment from using Mexico or Canada as a pathway into the U.S. market.
“The underlying concern is really about China,” he said. “What they’re trying to do is to figure out how to craft new rules to make it so, from the United States perspective, fewer Chinese inputs — fewer Chinese car parts, for example — would end up getting assembled into a vehicle in Mexico and shipped into the United States with that low tariff.”
Bown said that Mexico has already taken some steps that align with U.S. concerns about China with increased tariffs on Chinese imports. Canada, which has taken a more adversarial stance to Trump’s tariffs on its exports, has historically aligned with the U.S. on some China-related trade measures but has recently allowed some Chinese electric vehicle imports. But the economist added that all three countries would need to reach an agreement to avoid making products more expensive.
“They kind of need to be all on the same page for there to be one integrated North American supply chain that can operate at scale,” he said. “It’s less expensive if all three countries are doing it together. It’s really, really expensive if they’re doing it independently,” he said.
“If you start to see tariffs between the United States, Canada and Mexico on farm products, that’s going to make groceries more expensive… Whether we’re talking about avocados from Mexico or strawberries or tomatoes… just having integrated markets for cattle like we’ve had historically.”
Auto industry leaders from the Alliance for Automotive Innovation, the American Automotive Policy Council, and several others said in a joint statement, “The USMCA is a success story for the entire U.S. auto industry, with billions invested in U.S. production and thousands of manufacturing jobs created since the agreement entered into force. It has also been a success story for American consumers, allowing U.S. automakers to provide families with a wide variety of vehicle choices that fit every budget.
“We urge the leaders of the U.S., Canada, and Mexico to swiftly reach consensus on an extension of USMCA that preserves the existing trilateral partnership, returns to preferential treatment for qualifying goods, and continues the stability and predictability that has helped the industry thrive for the past six years.”
Phil Lempert, a food industry analyst and founder of SupermarketGuru.com, told Newsweek, “This isn’t a routine trade review, this is a slow-motion collision. Mexico and Canada aren’t just trading partners, they’re the produce aisle, the dairy case, and half the protein case for American shoppers. Nearly $2 trillion in trilateral trade runs through this agreement every year, and instead of using this six-year checkpoint to lock in stability, Washington is turning it into leverage over everything from migration to critical minerals to dairy access. That’s a disaster for anyone trying to run a retail grocery business or feed a family right now.
Every round of renegotiation, every threatened tariff, every retaliation gets priced into the supply chain long before it ever shows up on a receipt. We’re already living through what I call the fifth force of food inflation, and now you can add trade brinkmanship on top of drought, labor costs, and energy. Produce, avocados, tomatoes, beer, dairy, packaged goods with cross-border ingredients, all of it gets more expensive and less predictable. Retailers hate uncertainty more than they hate high prices, because at least high prices they can plan around. This kind of on-again, off-again trade tension means shrinkflation, price hikes, and empty shelves all become more likely, right when consumers are already stretched thin. If they blow past July 1 without a real extension 2027 grocery bills are going to reflect it and we will see even higher prices”
Business Roundtable CEO Joshua Bolten said in a statement, “Over the past six years, USMCA has delivered significant economic benefits for the United States. North American trade supports more than 13 million American jobs, and Canada and Mexico are the top export markets for U.S. manufactured goods and agricultural products. All three economies have grown since USMCA entered into force, but the United States has grown the most.
“As the agreement reaches this important milestone, the three governments can better align policies against unfair trading practices, reduce regulatory and economic friction within the region, and ensure North America is better positioned to compete with non-market economies. Business Roundtable urges the Administration to work expeditiously with Canada and Mexico to strengthen and extend USMCA.”
News
What Items Will Be Hardest Hit?
The products most vulnerable to higher prices would likely be those that depend heavily on North American supply chains.
Fresh produce could be among the first categories affected because fruits and vegetables often move quickly from farms to grocery shelves. Mexico is a major supplier of everyday grocery items including avocados, tomatoes, berries, peppers, cucumbers and limes, meaning any new trade costs or border disruptions could put pressure on prices.
Other areas that could face pressure include:
- Automobiles and auto parts
- Agricultural products
- Processed foods
- Household goods manufactured in North America
- Industrial materials used in manufacturing and construction
However, the impact would not necessarily be immediate or uniform. Companies may choose to absorb some increased costs, switch suppliers, or adjust their operations rather than pass every expense directly to consumers.
What is the USMCA?
The USMCA is a trade agreement between the United States, Mexico, and Canada that replaced the North American Free Trade Agreement (NAFTA) in 2020.
The agreement governs how goods and services move between the three countries, including rules covering tariffs, labor standards, agriculture, automobiles, and intellectual property.
Supporters argue the agreement provides stability for businesses and strengthens North American supply chains. Critics have argued that some provisions do not go far enough to protect certain American industries.
The agreement includes a six-year review process, meaning the three countries were expected to evaluate its performance and consider whether to extend it. Failure to reach agreement does not immediately terminate the pact, but it can trigger a longer process that creates uncertainty for businesses.
Why Did Trump Flip-Flop on The USMCA Deal?
Trump was one of the driving forces behind replacing NAFTA with the USMCA during his first term, presenting the agreement as a better deal for American workers and businesses.
The agreement was promoted by the administration as a way to encourage manufacturing in North America, strengthen labor protections, and update trade rules for modern industries.
However, Trump has also repeatedly criticized existing trade arrangements and argued that the United States should have more leverage in negotiations with trading partners.
The decision not to move forward with an automatic renewal reflects a broader approach by the administration of using trade reviews and tariff threats as negotiating tools.
Supporters of the move argue that maintaining pressure on Canada and Mexico could produce better terms for American industries. Critics warn that uncertainty could discourage investment and increase costs for consumers and businesses.
Could This Spark a New Trade War?
The decision raises concerns that a prolonged dispute between the three countries could escalate into a broader trade conflict.
Canada and Mexico are among the United States’ largest trading partners, and all three economies are closely connected. A breakdown in negotiations could lead to retaliatory measures, increased tariffs, and disruptions for businesses operating across borders.
Trade experts say the outcome will depend largely on the negotiations that follow. A revised agreement could eventually provide more certainty, while a failure to reach a compromise could create greater economic risks.
For Americans, the key issue is whether the dispute remains a negotiating tactic or develops into a larger confrontation that affects prices, supply chains, and the broader economy.
For now, the USMCA remains in place—but businesses and consumers are watching closely to see what comes next.
Contact Newsweek editors on this story: Gabe Whisnant and Cristina Diciu.
