U.S. says USMCA cannot continue as is, opts for harsh annual reviews instead of renewal

[Financial News]  

The Trump administration has decided not to renew the free trade agreement with Canada and Mexico, the United States–Mexico–Canada Agreement (USMCA). Instead, it will review compliance with the deal every year.
According to CNBC and other foreign media, Jamieson Greer, the Office of the United States Trade Representative (USTR), said in a statement on the 1st, local time, that the administration would "continue to engage with Mexico and Canada to address the agreement's blind spots."
USMCA was signed during Trump's first term to replace the North American Free Trade Agreement (NAFTA). Trump, who led the negotiations, once called it "the best deal we could make."
But after returning to office for a second term, Trump has repeatedly voiced dissatisfaction with the pact, fueling speculation that it would be revised.
The day Greer issued the statement was the final deadline for deciding whether to keep USMCA in place for another 16 years.
Since all three countries have chosen not to withdraw immediately, the agreement will remain in force for the next 10 years. However, it will enter a harsh annual review system. The review process leaves room for major renegotiations. It also gives the United States a powerful tool to pressure Canada and Mexico each year, including demands for stricter rules of origin for automobiles and tougher action against transshipment to China.
A senior Trump administration official told reporters that the president had "decided not to sign off on renewing USMCA without resolving the existing issues."
He added, "In other words, the United States did not agree to renew USMCA in its current form. Therefore, USMCA was not renewed."
According to the official, Trump's main concern over USMCA is that the United States runs a massive trade deficit with Canada and Mexico.
As Greer said, the Trump administration plans to keep engaging with the two countries to address the agreement's loopholes.
When the 26-year-old NAFTA was scrapped and USMCA took effect in July 2020, Trump described it as "the fairest, most balanced, and most beneficial trade agreement we have ever made."
But his stance changed after returning to office for a second term, amid rising tensions with Mexico and Canada.
In June, Trump said of USMCA, "I may or may not renew it," and added, "We don't need anything Canada and Mexico have, but they need everything we have. They need to treat us better."
Trump has long complained about the persistent U.S. trade deficit and, after returning to office for a second term, rolled out sweeping tariff policies.
Meanwhile, the United States has already held several rounds of trade talks with Mexico and agreed to continue negotiations even after the USMCA renewal deadline passed on this day, but it has not even begun talks with Canada yet.

dympna@fnnews.com Song Kyung-jae Reporter