Mexico | Mexico ahead of the USMCA Review

Summary

The U.S. decision not to extend the USMCA confirms our baseline scenario that the agreement will remain in force. The USMCA will remain in force until 2036 unless all three parties agree to extend it.

Key points

• Key points:
• The formal review process began on July 1. There is no deadline for completing the review, and it could continue on an annual basis through 2036.
• Now that the review process has started, the USMCA may be extended for an additional 16-year term. Such an extension can be agreed at any point before 2036. In practice, this creates a seven-year window (2029–2036) during which the agreement could be renewed after Donald Trump's presidency.
• Since the agreement entered into force, any of the three parties has been able to withdraw by providing six months' prior notice. So far, there is no indication that the United States intends to pursue this option.
• The USTR's decision confirms our baseline scenario: the USMCA will not be extended at this stage, but it will remain in force. We continue to view the agreement as a strategic instrument for the United States, as evidenced by the preferential treatment it has received relative to other trade agreements. Exports that comply with USMCA rules of origin continue to enjoy duty-free access, making it the only trade agreement that has so far been exempt from the broad tariffs imposed by the current U.S. administration.
• The current scenario remains favorable for Mexico, as the country continues to face one of the lowest levels of trade protection among the United States' major trading partners, preserving a competitive advantage for Mexican exports to the U.S. market.

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