The year 2026 marks a pivotal moment for the USMCA sunset clause 2026, as the first mandated review under the USMCA sunset clause framework approaches. Replacing NAFTA on July 1, 2020, the US‑Mexico‑Canada Agreement sets the stage for a far-reaching evaluation that could redefine North American trade.
From NAFTA to USMCA: a Changing Landscape
While the NAFTA era brought its share of success, it became clear that an update was necessary. The three countries attempted to open markets for North American products in the Asia-Pacific with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, this effort was interrupted by the U.S. withdrawal under the Trump administration, the renegotiation of NAFTA, and the subsequent birth of the USMCA.
Under the USMCA sunset clause, a scheduled review in 2026 becomes essential to assess the modernized elements of the agreement—from digital economy provisions to labor and environmental standards.
US concerns and the Sunset Clause
During the USMCA renegotiation, the U.S. prioritized two key objectives:
- addressing the trade deficit with Mexico
- securing control over the agreement’s future
While the original “Sunset Clause” proposal—requiring termination after five years unless renewed by consensus—was not adopted, it highlights how the USMCA sunset clause 2026 may become a flashpoint for U.S. demands to control the agreement’s future.
The 2026 Review: Implications of USMCA Sunset Clause
Article 34.7 mandates a “joint review” on the sixth anniversary, allowing each party to submit recommended actions prior to the meeting. The USMCA sunset clause thus gives legal standing to potential modifications in 2026.
“…on the sixth anniversary of the entry into force of this Agreement, the Commission shall meet to conduct a ‘joint review’ of the operation of this Agreement, review any recommendations for action submitted by a Party and decide on any appropriate action. Each Party may provide recommendations for action by the Commission at least one month before the joint review meeting of the Commission takes place…”
Opportunities under the USMCA Sunset Clause
The 2024 U.S. elections, coupled with ongoing trade disputes like Mexico’s energy policy and the Genetically Modified Corn Decree, further add complexity to the situation. Despite some challenges, the USMCA facilitates increased trade between the three nations. Mexico became the top trading partner in 2023. According to figures from the U.S. Census Bureau, Mexico exported goods to the U.S. for $475 billion dollars, representing a 4.6% growth. Mexican exports accounted for 15.4% of the total merchandise that the United States purchased from its trading partners.
Risks and Tensions
The USMCA sunset clause framework places all 20 dispute cases filed in the first three years under sharper scrutiny. Issues such as labor conditions in Mexico, automotive origin rules, and Chinese EVs entering via Mexico could influence 2026 discussions.
To date, there are more than 11 cases that have been filed against Mexico, most in the automotive sector. On the other hand, a panel ruled against the U.S. in regards to an erroneous interpretation of the methodology for calculating the Regional Content Value (RVC) in the automotive rules of origin. As of today, the U.S. has not adopted the panel’s ruling, nor has Mexico responded with retaliation. Recently, concerns have been growing over Chinese EV’s entering the U.S. market through a strategy that includes Mexico.
The Future of the USMCA Sunset Clause
Under the USMCA sunset clause 2026, much hinges on political leadership in both Mexico and the U.S., as the review could range from simple reaffirmation to broader renegotiation—or even potential termination.
It would seem then that the issues that could be “reviewed” in 2026 would be related to the irritants that have strained the U.S.-Mexico trade relationship. However, the review does not imply a renegotiation of the USMCA. An interpretation of “review” could be simply a process where all parties ratify (or not) their interest in continuing with the treaty as it stands. It could also mean a more lengthy process of negotiations.
The coin is in the air. Much depends on who is at the helm in the next administration in both Mexico and the United States.
Read more in the followup article, "Revisiting the 2026 review: Trump v Harris Policy Review"
About the author
Monica Lugo has experience in both the private and public sectors. She has worked for companies such as BMT Consulting and Euromonitor International coordinating projects, elaborating sectorial analysis, market studies, among others. In the public sector, she has worked in the international areas of the Ministry of Agriculture, Office of the President, and the Ministry of Public Function.
In 2012, she joined the Ministry of Economy in the Undersecretariat of Foreign Trade, where she led negotiations on Sanitary and Phytosanitary Measures, Competition, Trade Remedies, State-Owned Enterprises, Technical Barriers to Trade and Sectoral Annexes of several trade agreements such as the Comprehensive and Progressive Trans-Pacific Agreement (CPTPP), Pacific Alliance, USMCA, Mexico-European Union Free Trade Agreement, among others. She subsequently joined the Ministry of Foreign Affairs in April 2019 as Deputy General Director for Competitiveness and Innovation in the Under-Secretariat for North America, advising on the process of ratification of the USMCA and trade negotiations with the United States, also collaborating on trade promotion and innovation issues.
She has also collaborated giving courses and conferences on international trade negotiations in different institutions, organizations, and associations. She wrote as co-author an article regarding Mexico’s strategy in the negotiation of the USMCA with the United States and Trump’s policy which was published in February 2020, at the Journal of International Economic Law.
In January 2020 she joined Prodensa as Director of Institutional Relations. In June of this year, Forbes magazine included her in its list of the 100 most powerful women in Mexico. Ms. Lugo graduated from ITAM with a degree in International Relations.