The Office of the United States Trade Representative declined to renew the U.S.-Mexico-Canada Agreement (USMCA) last week, surfacing questions about the deal’s future that have been percolating throughout rounds of negotiations.
While the decision wasn’t quite the vote of confidence some stakeholders were hoping for, the outcome shouldn’t come as a surprise or be viewed as a “death knell” for the trilateral trade pact, according to Melissa Irmen, director of advocacy at the National Association of Foreign-Trade Zones (NAFTZ).
“It was fairly clear heading into the deadline that USTR was working to run out the clock rather than push the President toward any formal commitment,” she told Sourcing Journal when asked about the implications of Thursday’s decision.
Irmen, who works closely with U.S. lawmakers as well as importers and exporters within U.S. Foreign-Trade Zones on customs compliance and supply chain strategy, said she and her contemporaries didn’t expect a renewal or full-term extension given the icy nature of some of the talks between the trade partners in recent months, especially between the U.S. and Canada.
Though it is a standing possibility, it’s unlikely that any of the trading partners will signal a withdrawal from the agreement, Irmen said, noting that “there’s no negotiating leverage in walking away.” Instead, she said many had been expecting the deal to move “into a sunset framework” wherein it will be reassessed on a yearly basis for its duration or until a resolution is reached.
“With the current agreement’s rules staying in place for up to 10 years, there is real runway for continued investment confidence—this isn’t a scenario where the rules companies are operating under today suddenly shift. But increased uncertainty is real, and it will factor into planning, particularly as annual reviews begin building renewal pressure,” Irmen explained.
While Irmen is confident that last week’s outcome won’t blunt the trade agreement’s efficacy, given the $1.8 trillion in annual trade that takes place between USMCA members, she’s also a proponent of recently introduced legislation that aims to bolster U.S. businesses operating in American FTZs.
The Foreign-Trade Zone Export Enhancement Act, introduced in the House of Representatives, would provide duty-relief benefits for certain products that are produced or altered in federally designated U.S. FTZs and then exported to Canada and Mexico. Companion legislation was introduced in the Senate in June.
Under current USMCA rules, businesses that operate within U.S. FTZs are required to pay tariffs on inputs before they export the finished goods to North American trade partners, “even when those products would otherwise qualify for preferential treatment under the agreement,” a statement from NAFTZ explained. By contrast, Canadian and Mexican manufacturers benefit from their own national duty-relief frameworks.
Strengthening USMCA through this supporting legislation “would provide U.S. FTZ manufacturers a structured duty relief program to compete on more equal footing with comparable programs already in place in Mexico and Canada, regardless of how the broader renewal question plays out,” Irmen said.
Tim Beckhoff, senior director of industry solutions SRM at o9 Solutions, an AI-powered enterprise planning platform, said that while a non-renewal doesn’t signal an end for the deal, supply chain leaders “are balancing immediate actions to protect operations with longer-term decisions that reshape their networks.”
Agility is key to reacting quickly to disruption, whether it’s caused by shifting trade relationships or other impediments to normal trade flows. Preparedness is essential, as such changes can be unexpected.
For example, the USTR is currently weighing imposing tariffs on dozens of global economies—including Mexico and Canada—as a result of Section 301 investigations into their forced labor prohibitions and structural excess capacity. While recent trade actions have exempted USMCA-qualifying goods, it remains unclear what the Trump administration’s plan is for potential Section 301 tariffs on free trade agreement partners.
To remain guarded against disruption, organizations should have a real-time view of open purchase orders, as well as in-transit shipments, bonded inventory and production commitments. This information should be broken down by SKU, supplier, border crossing, Incoterms, tariff classification, and USMCA qualification, he said.
“That visibility allows teams to run landed-cost scenarios at the SKU level, where the greatest exposure often lies in components, sub-assemblies, packaging, and parts that cross the border multiple times before reaching the finished product,” he added. Companies should also strive to improve their trade data quality, their relationships with customs brokers and their contingency transportation options.
“More structural decisions, including shifting production tooling or qualifying new suppliers, require a much higher threshold because they involve greater investment and longer implementation timelines,” Beckhoff said.
“Companies should also prepare scenario plans before disruption occurs. That includes modeling outcomes such as increased documentation requirements, a fallback to most-favored-nation tariffs, border delays, supplier changes, or tariff costs being passed through to customers,” he added. “Having those scenarios quantified in advance enables leaders to make faster, more confident decisions instead of reacting after the disruption is already affecting operations.”
