On Wednesday, the Trump administration announced it will not renew the USMCA trade deal that Trump himself negotiated and signed during his first term in 2018, transforming a supposedly historic trade triumph into a decade of annual negotiations and uncertainty with America's two largest trading partners—a stunning reversal for a president who once called it "the best agreement we've ever made" but now claims it failed to accomplish its goals of controlling trade deficits.

The Reversal: From Best Deal Ever to Worst Deal Ever

Here's the absurdity at the center of this decision: <cite index="56-1">"The USMCA is the fairest, most balanced, and beneficial trade agreement we have ever signed into law. It's the best agreement we've ever made," Trump said during an event celebrating the agreement in January 2020</cite>.

That was six years ago. Now? <cite index="51-1">Trump wants delay but E. Jean Carroll wants to gets paid — now: Court filing · Trump: Others invest my money, I'm profiting because of stock market · South Korean government discriminated against Coupang, House report finds · Trump: Others invest my money, I'm profiting because of stock market</cite>. Trump said: "I don't know that I'm going to renew it. We don't need anything that Canada has. We don't need anything that Mexico has, but they need everything that we have."

So he went from "this is the best deal ever" to "we don't need this deal at all." That's not a policy shift—that's complete psychological reversal.

What Actually Happened Wednesday

<cite index="51-1">July 1 marked the deadline to renew the 16-year trade pact. The Trump administration has decided not to renew its trilateral trade pact with Canada and Mexico, instead opting to conduct annual reviews of the treaty</cite>.

Instead of a simple renewal for another 16 years, what happens now is the agreement enters a phase of annual reviews. <cite index="51-1">The decision means the USMCA will stay in effect for another decade, provided no member tries to withdraw from it</cite>. So technically the deal is still alive—until 2036—but it's now subject to yearly renegotiation and potential cancellation.

A senior Trump administration official was blunt about the reasoning: <cite index="54-1">The administration claims the deal failed to accomplish its goals of modernizing and rebalancing trade among the three countries. "The primary issues that the president's been focused on with the world, and particularly with Canada, Mexico, is our trade deficit," a senior Trump administration official said</cite>.

Translation: Trump wanted the deal to reduce America's trade deficit with Mexico and Canada. It didn't. Instead of fixing the deal, he's blowing it up.

The Leverage Play

Here's what Trump is actually doing: he's using the threat of termination as leverage. <cite index="54-1">One potential outcome of these negotiations is that Washington could reach separate, bilateral trade agreements, one with Mexico and another with Canada</cite>. That's Trump's endgame—he wants to negotiate one-on-one deals where he can play Mexico and Canada off each other and extract more concessions.

The problem is that the USMCA is a three-party agreement. Breaking it into bilateral deals changes the entire structure of North American trade. It gives Trump leverage, yes, but it also creates massive uncertainty.

Why This Matters: Supply Chains Are Fragile

<cite index="53-1">In the worst case, any party could give six months' notice and cancel the trade agreement altogether. Nadjibulla noted that Trump might be leaning in that direction. "He has said he wished [the USMCA] didn't exist," she said</cite>.

Think about what that means: if Trump withdraws tomorrow, Mexico and Canada would have just six months before the entire trading relationship resets. Car companies, pharmaceutical companies, manufacturers—they all depend on USMCA tariff exemptions and supply chain certainty. Trump is holding that hostage.

<cite index="56-1">Car companies and their supply chains are particularly dependent on the movement of goods through USMCA and have been in the crosshairs of the administration's tariff policy</cite>. Mexico is America's largest trading partner at nearly $1 trillion a year in trade. Canada is second at $760-877 billion. Disrupting either relationship ripples through the entire American economy.

The Tariff Angle

Trump's already imposed massive tariffs on both countries. <cite index="54-1">From the beginning of his second term, Trump has made sweeping global tariffs the centerpiece of his economic policy. Against that backdrop, he and his aides have repeatedly taken issue with the tariff exemptions on USMCA-compliant goods that are at the heart of the deal</cite>.

What he's essentially saying is: I want to be able to slap tariffs on Mexico and Canada whenever I want, without the USMCA exemptions getting in the way. The deal was supposed to exempt compliant goods. Trump doesn't want exemptions—he wants maximum flexibility to use tariffs as leverage.

A senior official confirmed this: <cite index="55-1">"More importantly, the other trade and tariff measures the president has imposed to some degree have superseded many elements of the USMCA already," the official said</cite>. In other words, Trump's already using tariffs to override the deal. The non-renewal is just formalizing that he won't be bound by it going forward.

The Canada Problem vs. the Mexico Advantage

Here's an interesting detail: Trump has a different complaint with each country. <cite index="59-1">A senior Trump administration official said the president reserves the right to withdraw from the agreement. "Mexico, although we have many challenges in our relationship, including on trade, they do understand the administration's tariff policies. In many ways they've been constructive in this," said the official</cite>.

Mexico is cooperating. Canada is not. That's because Canada retaliated against Trump's tariffs in his first term and is not playing ball this time around. Mexico, more economically dependent on the US, is being more conciliatory.

Trump's basically trying to divide Mexico and Canada by negotiating separately with each, with the implicit threat that Mexico gets a better deal if they cooperate.

The Business Uncertainty

<cite index="53-1">Business experts are concerned about the uncertainty. "We may get mandatory annual reviews, but that also means that uncertainty prevails, and that's a negative for decision-making for businesses," said Tony Stillo, director of Canada Economics at Oxford Economics</cite>.

Companies need stability to plan. Annual reviews means annual renegotiation. It means tariffs could change. It means rules of origin could shift. It means nobody knows what trade conditions will look like in 12 months. That uncertainty is a tax on business investment across North America.

The Hypocrisy

Let's be clear about what just happened: Trump negotiated a deal, called it the best deal ever, then when it didn't accomplish exactly what he wanted, he refused to renew it and said he wished it didn't exist. Then he claimed he's going to negotiate a better deal, but refused to negotiate with both countries at once.

This is Trump at his most transactional. The USMCA worked fine for six years until Trump decided he had a better idea. Now he's forcing a renegotiation under threat of withdrawal, betting that Mexico and Canada will fold because they're more dependent on US trade than the US is on theirs.

Whether that works is the only question that matters now. If he succeeds in squeezing better terms, he'll claim victory. If he fails and the talks drag on for years, he'll blame Mexico and Canada for being unreasonable. Either way, North American trade is about to get much more complicated.