USMCA and North American Tariff Developments
Prepared by Greenberg Traurig and shared in partnership with World Trade Center Utah.
On July 1, 2026, the U.S. declined to confirm an extension of the United States-Mexico-Canada Agreement (“USMCA”) in its current form. As a result, USMCA was not extended for an additional 16-year term and the Parties will instead proceed with annual joint reviews under the Agreement’s review process.
USMCA remains in force, and qualifying trade continues to benefit from existing tariff preferences, rules of origin, certification procedures, customs disciplines, and dispute settlement mechanisms. The principal immediate change is that the 16-year extension was replaced with annual review and continued negotiation.
Against that backdrop, the broader North American trade-policy environment has also continued to evolve. The U.S. has advanced bilateral negotiations with Mexico, imposed new Section 338 tariffs on certain Canadian goods, and established a new Section 232 incentive program for investments in U.S. primary aluminum production. Although these measures do not suspend USMCA, they increase tariff, compliance and planning risk for businesses operating within integrated North American supply chains.
What changed
Continued U.S.-Mexico Negotiations
The U.S. and Mexico commenced a third bilateral negotiating round in Mexico City on July 21. The announced agenda includes steel and aluminum, automobiles, economic security, labor, agriculture and electronic payment services. Prior negotiating rounds also addressed rules of origin, regulatory compatibility, and measures intended to limit the use of non-market inputs in North American supply chains.
These discussions indicate that the review process is developing into a continuing negotiation over the conditions under which businesses may access the benefits of regional integration. Areas of particular concern include regional sourcing, third-country inputs, industrial policy, labor enforcement, and supply-chain security.
New Section 338 Tariffs on Canadian Goods
On July 20, President Trump issued three proclamations under Section 338 of the Tariff Act of 1930 imposing additional 50% tariffs on specified Canadian goods. The measures respond to alleged Canadian discrimination involving U.S. automobiles, alcoholic beverages, and dairy products.
The new tariffs are scheduled to take effect 30 days after signing. Importantly, they apply to covered goods even when those goods qualify as originating under USMCA. Energy, potash, products already subject to Section 232 duties and certain other goods (including specified fish and critical-mineral products) are excluded.
Accordingly, USMCA origin alone will not protect covered Canadian goods from the new Section 338 duties. Importers must review the applicable tariff classifications, the relevant proclamation annexes, and any available exclusions.
New Section 232 Aluminum Onshoring Program
Also on July 20, the President modified the Section 232 aluminum regime by directing the Secretary of Commerce to establish an incentive program for companies that commit to building, expanding, or refurbishing U.S. primary aluminum facilities.
Companies with an approved “onshoring plan” may import a quantity of primary aluminum corresponding to the projected annual output of the U.S. facility at one-half of the otherwise applicable Section 232 tariff rate. Plans must include a commitment to begin construction by January 20, 2029, and will be subject to Commerce review, monitoring, reporting, and enforcement.
The proclamation does not eliminate Section 232 duties generally. It creates a conditional tariff benefit for approved investment projects and applies to primary aluminum rather than derivative aluminum articles or industrial equipment more broadly.
What has not changed
USMCA remains in effect. The United States’ decision not to extend the Agreement on July 1 did not constitute a withdrawal. Current preferential treatment remains available for qualifying goods, subject to compliance with the applicable origin, certification, and recordkeeping requirements.
Businesses may therefore continue to:
Claim USMCA preferential tariff treatment;
Issue and rely on certifications of origin;
Apply existing regional value content and tariff-shift analyses; and
Use the Agreement’s customs and dispute settlement mechanisms.
At the same time, USMCA does not prevent the U.S. from applying separate domestic trade authorities. The Section 338 tariffs on Canada and the continuing Section 232 regime illustrate that goods may qualify for USMCA treatment and nevertheless remain subject to additional duties under another legal authority.
Manufacturers
Manufacturers may continue sourcing qualifying inputs from Mexico and Canada under existing USMCA rules. However, they should anticipate increased scrutiny of:
Rules of origin and regional value content;
Steel and aluminum sourcing;
Supplier certifications and traceability;
Chinese and other non-North American inputs; and
Labor and economic-security compliance.
Manufacturers using Canadian components should also determine whether those inputs are covered by the new Section 338 tariffs or excluded because they are already subject to Section 232.
Companies involved in aluminum-intensive production should evaluate whether participation in the new onshoring program is commercially viable.
Importers
Importers should distinguish among four separate issues:
Whether the goods qualify for USMCA treatment;
Whether they are covered by the new Canadian Section 338 measures;
Whether they are subject to Section 232 duties; and
Whether an exclusion or reduced-rate program applies.
Importers should therefore review classifications and landed-cost assumptions before the tariffs take effect.
Importers of aluminum should confirm whether the merchandise constitutes primary aluminum, a derivative article, or another product category. The new onshoring benefit is not a general reduction in aluminum duties and will apply only through an approved Commerce program.
Exporters
U.S. exporters to Mexico continue to benefit from the existing USMCA framework. The current negotiations are focused on resolving trade barriers and strengthening bilateral production. Nevertheless, exporters should monitor negotiations involving agriculture, industrial goods, digital services, labor, customs procedures, and regulatory compatibility.
The commercial environment with Canada is less predictable. Although the new U.S. tariffs apply to imports from Canada, the measures may lead to Canadian retaliation or affect commercial relationships and sourcing decisions. Exporters should review contractual allocation of tariffs, price-adjustment provisions, and customer exposure in Canada.
Companies Considering Nearshoring
The recent developments do not eliminate the commercial rationale for nearshoring in Mexico. USMCA remains operative and the U.S. and Mexico continue to negotiate closer regional production and supply-chain integration.
Companies should not assume that current rules will remain unchanged throughout the life of a long-term investment. Nearshoring projects should be evaluated against potential future requirements involving:
Higher North American content;
Stricter treatment of Chinese or other non-regional inputs;
Enhanced origin tracing;
Labor and environmental enforcement;
Steel and aluminum sourcing; and
Sector-specific economic-security restrictions.
A nearshoring model that relies primarily on non-North American inputs and limited processing in Mexico will face greater regulatory risk than a model supported by genuine regional production, documented transformation, and diversified sourcing.
Recommended Actions
Businesses should consider the following immediate steps:
Review Canadian imports against the Section 338 tariff annexes and exclusions.
Revalidate USMCA origin analyses, certifications, bills of materials, and supplier documentation.
Identify exposure to Chinese and other non-North American inputs.
Separate Section 232, Section 338, and USMCA treatment in landed-cost models.
Review supply, distribution, and manufacturing agreements for tariff pass-through, change-in-law, price-adjustment, and sourcing-flexibility provisions.
Stress-test nearshoring and capital-investment plans against stricter regional-content and economic-security requirements.
Monitor Commerce guidance regarding applications, approvals, and enforcement under the aluminum onshoring program.
USMCA continues to provide the governing framework for preferential North American trade. The principal development is the emergence of a more conditional and interventionist trade-policy environment.
For U.S. and Utah businesses, the appropriate response is to preserve access to existing USMCA benefits while preparing for targeted tariff measures, origin and sourcing requirements, and continuing negotiations over the structure of North American production.
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