North America’s trade framework just entered uncharted territory — and electronics manufacturers with operations spanning the U.S., Mexico, and Canada should be paying close attention.
By Jennifer Read, Editor EMSNOW
On July 1, 2026, the USMCA Free Trade Commission held the agreement’s first mandatory six-year joint review, a checkpoint written into the deal specifically to force a periodic reckoning on whether the U.S., Mexico, and Canada still want to keep trading under its terms. The United States chose not to confirm it. In a formal statement, U.S. Trade Representative Jamieson Greer said the U.S. “did not agree to renew the USMCA in its current form,” adding that, as a result, “the USMCA is not renewed.” Mexico and Canada, notably, had both indicated they were prepared to extend the agreement for its full additional 16-year term.
That sounds more alarming than it currently is. The USMCA does not expire; it remains fully in force, with all existing tariff preferences, rules of origin, and dispute-settlement mechanisms intact, right through its original 16-year term ending July 1, 2036. What changed on July 1 is procedural but consequential: because the U.S. declined to confirm renewal, the agreement now enters a cycle of mandatory annual reviews rather than one settled decision. Trade attorneys tracking the process have been careful to note that a 16-year extension is still available at any point if the three governments agree to it in writing. In other words, this was a deferral, not a rejection.
A Bilateral, Not Trilateral, Process
Rather than negotiate all three countries around one table, the U.S. has so far pursued separate bilateral tracks, one with Mexico, and a slower-moving one with Canada. The U.S.-Mexico track has moved fastest, with three negotiating rounds either completed or scheduled by late July: an initial round in Mexico City in late May covering automotive rules of origin, steel and aluminum trade, and economic security; a second round in Washington in mid-June that dug further into rules of origin for industrial goods and opened conceptual discussion of labor and environmental provisions; and a third round back in Mexico City in the final week of July. Canada, by contrast, participated in the July 1 Commission meeting but has not yet begun substantive text-based negotiations with the U.S. which is a gap that analysts at Chatham House and elsewhere flag as a real, if not yet alarming, source of asymmetry in how the review is unfolding.
Automotive: The Sector with the Most at Stake
No sector is more exposed to this review than automotive, and that matters enormously to the electronics manufacturers who supply it. The USMCA’s automotive rules of origin were already the most stringent of any U.S. trade agreement, requiring higher regional value content (RVC) than NAFTA and adding labor value content requirements tied to wages paid in the region. The Trump administration has signaled interest in tightening those thresholds further as part of this review, and a long-running dispute over how “core parts”, i.e engines, transmissions, and similar components, count toward RVC calculations remains unresolved. Mexico and Canada have argued that once a core part itself qualifies as originating, its full value should roll up into the broader RVC calculation; the U.S. has taken a narrower interpretation, and a USMCA dispute panel previously sided with Mexico and Canada on the question, a ruling the U.S. has not fully implemented.
For EMS providers building automotive electronics, e.g. power modules, sensor assemblies, control units, wiring harnesses, this is not an abstract legal debate. USTR is required to deliver a biennial report to Congress on how the automotive rules of origin are functioning, and the most recent USITC assessment found a mixed picture: U.S. parts production ticked up modestly under USMCA, while U.S. vehicle assembly volume actually declined. That divergence is exactly the kind of data point that could justify further tightening of content thresholds, origin documentation, and audit frequency in the current round of talks.
Electronics: Rising Scrutiny from Nearshoring’s Own Success
Electronics manufacturing wasn’t originally expected to be a headline issue in this review, but it has become one, precisely because of how successful nearshoring to Mexico has been over the past several years. As contract manufacturers and OEMs shifted production of consumer electronics, industrial controls, and automotive electronics assemblies into Mexican facilities to shorten supply chains and reduce China exposure, that growth has drawn its own regulatory attention. Trade advisory firms including BSI Group have specifically flagged electronics as a sector facing “growing scrutiny” in this review cycle, precisely because of how much Mexico-based electronics manufacturing capacity has expanded. The likely mechanism is the same one automotive already faces: more frequent rules-of-origin audits, tighter component traceability requirements, and closer examination of where subassemblies and materials genuinely originate, particularly for inputs with Chinese content, which the U.S. has separately signaled it wants to restrict from counting toward North American regional value.
What This Means for EMS Executives
The practical upshot for electronics manufacturers is less about any single new rule and more about a multi-year stretch of compliance uncertainty. Trade advisory firms are converging on similar guidance: strengthen supplier documentation now, don’t wait for a finalized rule change. That means auditing bill-of-materials origin data down to the sub-tier supplier level, reassessing whether current regional value content calculations have the margin to absorb a stricter threshold and building contingency sourcing plans for components that currently rely on non-USMCA content. Companies that already export duty-free under USMCA preferences should expect more frequent origin verification requests from customs authorities on both sides of the border as this review proceeds.
The most likely near-term outcome, according to trade analysts at CSIS and elsewhere, is neither a clean renewal nor a collapse of the agreement, but a “painful extension” scenario: negotiations that stretch through the rest of 2026 and into 2027, concentrated on autos, economic security, and enforcement mechanics, with the underlying agreement staying in force throughout. For electronics and automotive supply chains built around three decades of North American integration, that means the rules haven’t changed yet, but the assumption that they won’t change is no longer one anyone can safely make.
Sources:
USTR — official statement on the USMCA joint review and nonrenewal (ustr.gov)
White & Case — legal analysis of the July 1 review outcome and negotiating timeline
Congressional Research Service (Congress.gov) — background on automotive rules of origin and the joint review process
Chatham House — analysis of what nonrenewal means for Mexico and the broader agreement
CSIS — scenario analysis for how the review is likely to unfold
BSI Group / Plante Moran / Steptoe — trade advisory guidance on manufacturer risk, compliance, and sector exposure (automotive and electronics)
Prodensa / SupplyChainBrain — industry trade press coverage of manufacturing impact
