The refusal of the Donald Trump administration to extend the United States-Mexico-Canada Agreement (USMCA) in its current form can be considered a new crisis for the North American free trade arrangement at first glance. However, this decision also reveals a shift in Washington’s strategic approach to regional economic integration. The U.S. has preferred to implement an annual review process starting in 2026 instead of completely terminating the agreement, guiding the parties toward a framework that is continuously open to renegotiation.[i] Washington’s demands for the relocation of production to the U.S., stricter origin rules in the automotive sector, and the reduction of trade deficits indicate that the USMCA is no longer seen merely as a free trade agreement.
This development represents the final stage of the transformation of the North American trade architecture from liberal economic integration to regionally governed economic security. The North American Free Trade Agreement (NAFTA), which came into effect in 1994, is considered one of the significant examples of the liberal economic understanding that facilitated the free movement of production factors and promoted regional economic integration during the period when globalization was gaining momentum. The USMCA, which came into effect during Trump’s first presidential term, represented a comprehensive revision of NAFTA by introducing stricter origin rules, labor standards, and new provisions regarding digital trade in the automotive sector.
One of the most notable aspects of the agreement was the addition of a review mechanism that requires the parties to evaluate the continuation of the agreement every six years. If one of the parties does not agree to the extension, the agreement continues to be in effect, but the annual review process begins, creating the possibility of termination at the end of the tenth year.[ii] The current discussion, however, is more about the second redesign of the trade agreement in line with the perspective of economic security rather than updating the technical provisions of the agreement.
The fundamental motivation behind this transformation is the Trump administration’s evaluation of trade policies from the perspective of economic sovereignty rather than economic growth. From Washington’s perspective, trade agreements are no longer institutional arrangements that provide long-term stability; they are becoming strategic tools that can be reshaped when necessary. Indeed, Trump’s statement in June 2026, suggesting that the U.S. could be better off without the USMCA, indicates that he views agreements not as indispensable institutional structures but as flexible tools that enhance negotiating power.[iii] This approach becomes more meaningful when considered alongside the Trump administration’s customs tariffs, reshoring policies, and strategies to bring industrial production back to the country.
At this point, it is not sufficient to analyze the process solely thru protectionist policies. The “weaponized interdependence” approach developed by Henry Farrell and Abraham Newman reveals that global economic networks can be used by states not only to generate wealth but also to restrict access, create dependency, and narrow the maneuvering space of rival actors.[iv] In this context, trade agreements are transforming from institutional regulations that facilitate market access into security tools that determine access to strategic production networks. The current geopolitics literature also points to a similar transformation. States now use economic power for geopolitical purposes not only thru customs tariffs but also thru regulatory tools such as rules of origin, investment controls, technical standards, and export controls.[v] Therefore, the renegotiation of the USMCA can be considered one of the concrete examples of the transition from the classical understanding of free trade to an economic security-focused “controlled regionalization.”
At the center of the USMCA discussions now lies a much broader issue than the bilateral trade balances with Canada or Mexico: China’s position within North America’s manufacturing networks. In recent years, the investments made by Chinese companies, particularly in Mexico, have facilitated easier access to the North American market, which is increasingly being viewed as an economic security issue in Washington. Washington’s approach is to strengthen the USMCA’s rules of origin to prevent Chinese companies from benefiting from the advantages provided by the agreement thru Mexico.[vi] This situation indicates that the agreement has transformed from a technical text regulating trade relations among the three countries into a strategic filter mechanism determining under what conditions China can be included in regional production chains.
From this perspective, Mexico stands out as one of the most critical actors of the new era. The nearshoring trend, where global companies are shifting their production centers outside of China, offers significant investment opportunities to Mexico. Geographical proximity, low production costs, and market access provided by the USMCA have made the country one of the most attractive manufacturing hubs in North America in recent years. However, Washington’s demands for higher American content ratios, stricter origin rules, and new standards regarding production processes may somewhat limit Mexico’s advantages. In other words, it is no longer sufficient for Mexico to be merely a manufacturing hub; it is also expected to create a controlled industrial ecosystem that complies with U.S. economic security standards. Therefore, the nearshoring process, while offering significant opportunities for Mexico, also brings with it new dependency relationships that could narrow the country’s economic policy space.
The situation is somewhat different from Canada’s perspective. Despite being one of the closest economic and security partners of the United States, Ottawa is not exempt from the Trump administration’s trade policies. While the Canadian government has stated that it is open to improving the agreement, ongoing trade disputes, particularly in the steel, aluminum, and automotive sectors, are complicating the negotiation process. Additionally, the uncertainty regarding the future of the USMCA has also impacted Canadian financial markets; analysts have revised their Canadian dollar expectations downward due to increasing risks and have assessed that the likelihood of an interest rate hike has weakened.[vii] These developments indicate that the strong political and security partnership with the United States does not provide any advantages in economic negotiations, and that the economic security approach has transformed into a broader strategic framework encompassing allied countries.
As a result, the Trump administration’s decision not to extend the USMCA in its current form does not mean a complete abandonment of free trade. What is noteworthy here is the beginning of a change in the logic upon which this arrangement is built. In the classical period of globalization, trade agreements were based on the “Just-in-Time” rationale, which focused on reducing costs and increasing efficiency. Today, they are being replaced by a “Just-in-Case” and controlled regionalization logic that aims to minimize geopolitical risks and focuses on who is producing rather than where. The main goal is to make the North American production area more resilient, more controllable, and more aligned with the U.S. economic security priorities against China. Therefore, discussions about the future of the USMCA indicate not only the model of economic integration in North America but also the direction of the global economic order, where trade agreements are being redefined along the axs of security, technology, and geopolitical competition in the 21st century.
[i] David Lawder, “US declines to extend North American trade deal, starting clock to end it while seeking changes”, Reuters, https://www.reuters.com/world/americas/us-canada-mexico-review-trade-pact-likely-putting-it-into-limbo-trump-demands-2026-07-01/, (Date Accessed: 05.07.2026).
[ii] “United States-Mexico-Canada Agreement (USMCA)”, Office of the United States Trade Representative, 2020, https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement, (Date Accessed: 05.07.2026).
[iii] Steve Holland ve David Shepardson, “Trump says US would do better without USMCA trade agreement”, Reuters, https://www.reuters.com/world/americas/trump-says-us-would-do-better-without-usmca-trade-agreement-2026-06-17/, (Date Accessed: 05.07.2026).
[iv] Henry Farrell ve Abraham L. Newman, “Weaponized Interdependence: How Global Economic Networks Shape State Coercion”, International Security, 2019; 44 (1): 42–79, https://doi.org/10.1162/isec_a_00351, s.45-46.
[v] Christopher Clayton, Matteo Maggiori ve Jesse Schreger, “A framework for geoeconomics”, CEPR, https://cepr.org/voxeu/columns/framework-geoeconomics, (Date Accessed: 07.07.2026).
[vi] Diego Marroquín Bitar ve William Alan Reinsch, “USMCA Review 2026: Six Scenarios for North America’s Future”, CSIS, https://www.csis.org/analysis/usmca-review-2026-six-scenarios-north-americas-future, (Date Accessed: 05.07.2026).
[vii] Fergal Smith, “Analysts cut Canadian dollar forecasts as USMCA uncertainty clips rate hike chances”, Reuters, https://www.reuters.com/world/americas/analysts-cut-canadian-dollar-forecasts-usmca-uncertainty-clips-rate-hike-chances-2026-07-03/, (Date Accessed: 07.07.2026).
