The USMCA 2026 Review: What Manufacturers Actually Need to Prepare For

The USMCA’s first joint review is set for July 1, 2026. If you manufacture in Mexico, or you’re considering it, you’ve likely seen the headlines. Some suggest the agreement could be renegotiated. Others warn it might not be renewed at all.

Most of that coverage is speculation. What’s been missing is a practical, operational perspective on what the review actually means for manufacturers, and what it doesn’t.

At Tetakawi, we currently support more than 60 manufacturers operating in Mexico, and we’ve guided hundreds more over the past four decades through multiple trade agreement transitions. We’ve seen what matters when policy shifts, and what turns out to be noise. This post is built on that experience.

What the 2026 Review Actually Is

The USMCA includes a built-in review mechanism. Every six years, the United States, Mexico, and Canada evaluate the agreement and decide whether to extend it. The first of these reviews takes place on July 1, 2026.

There are three realistic outcomes. First, all three countries agree to extend the USMCA for another 16 years, pushing its horizon out to 2042. Second, the parties negotiate revisions (tighter rules of origin, updated provisions on electric vehicles or critical minerals, stronger labor enforcement) and then extend. Third, one or more parties decline to extend, which triggers annual reviews and a 10-year sunset. The agreement would remain in force until 2036.

That third scenario is the one generating headlines, but it’s worth being precise about what it means. Even a failure to extend does not end the USMCA overnight. It creates a decade-long runway during which all existing provisions remain active. That’s not ideal, and uncertainty has real costs, but it’s a long way from the cliff edge some commentary suggests.

For a detailed breakdown of the review mechanics, the Congressional Research Service’s analysis is a good starting point.

Where the Three Countries Stand

The U.S. has signaled it intends to use the review as leverage. White House trade advisor Peter Navarro described “significant” flaws in the current agreement in a February 2026 Bloomberg interview, though he stopped short of discussing withdrawal. The USTR opened a public comment period in September 2025 and held formal hearings in December, receiving over 1,500 written submissions. What was expected to be a routine procedural review has become a negotiation.

The administration’s priorities are becoming clearer: stricter automotive rules of origin, restrictions on Chinese-owned manufacturing within North America, stronger labor enforcement, and new provisions covering electric vehicle supply chains and critical minerals. These aren’t surprises. They’re extensions of positions the U.S. has held since the original USMCA negotiations.

Mexico, under President Claudia Sheinbaum, has made USMCA preservation a top foreign policy priority. The Secretary of Economy launched formal consultations with the private sector in early 2026, focusing on automotive, energy, and agriculture. Mexico’s position is defensive but engaged: protect the existing framework while demonstrating compliance progress, particularly on labor standards. Canada announced formal review preparations in January 2026, focusing on digital trade, agricultural access, and maintaining supply chain stability.

The CSIS analysis frames this well: all three countries have strong economic incentives to reach a deal, but the path to getting there will involve real concessions. Over 75% of stakeholders who submitted comments to the USTR support keeping the agreement in force.

The Tariff Context: Headlines vs. Reality

The tariff environment has changed significantly. In March 2025, the U.S. imposed a 25% tariff on all imports from Canada and Mexico, but then immediately paused that tariff for goods that qualify under the USMCA. That distinction is everything.

According to Penn Wharton Budget Model data, the actual effective tariff rate on Mexican imports has ranged between 3.8% and 8% through 2025, a fraction of the 25% figure in the headlines. Why? Because the vast majority of goods crossing the border qualify for USMCA preferential treatment. BBVA Research reported that USMCA utilization among Mexican exporters jumped from 44.8% in January 2025 to 88.7% by November as companies restructured supply chains to qualify. Over 82% of U.S. imports from Mexico entered duty-free in the first half of 2025.

This is where it gets practical. From our experience supporting over 60 manufacturers in Mexico, approximately 85% of what our clients export qualifies under USMCA and enters the U.S. at preferential rates. USMCA compliance isn’t just a regulatory checkbox. It’s a meaningful cost advantage. And the current tariff environment has made that advantage even more pronounced.

The Federal Reserve’s July 2025 analysis estimated that USMCA compliance costs the equivalent of a 1.4–2.5% tariff on top of production costs. For most manufacturers, that’s a worthwhile trade-off compared to a 25% tariff on non-qualifying goods.

What’s Likely to Change, and What Isn’t

The consensus among trade analysts is that the USMCA will be extended, but with modifications. Here’s what to watch.

Automotive rules of origin are the most likely area for tightening. The current 75% regional value content requirement, already stricter than NAFTA’s 62.5%, may increase. The USITC’s second report on USMCA automotive rules found that compliance has had measurable cost impacts but has also increased North American sourcing. Expect this to be a central point of negotiation.

Electric vehicle and critical minerals provisions are almost certainly coming. The original USMCA didn’t anticipate the speed of the EV transition. The Baker Institute’s strategic priorities analysis identifies battery supply chains and rare earth sourcing as areas where all three countries have incentive to align.

Restrictions on Chinese-affiliated manufacturing within North America have bipartisan support in the U.S. and are a near-certainty in any revised agreement. CSIS has framed the review as an opportunity to build a “Fortress North America” against supply chain dependence on China.

Labor enforcement will intensify regardless of the review outcome. The USMCA’s Rapid Response Labor Mechanism has already been invoked 13 times, with eight positive resolutions that improved wages and working conditions at specific facilities. The U.S. Department of Labor has signaled that enforcement will only expand.

What’s unlikely to change is the fundamental architecture: duty-free access for qualifying goods, the shelter/IMMEX framework, the core incentive structure that makes manufacturing in Mexico viable. Those elements enjoy broad support across all three countries.

The Factor That Doesn’t Change: Labor Availability

Here’s what’s easy to lose in the policy debate: the fundamental reason companies choose Mexico isn’t a trade agreement. It’s labor.

The U.S. manufacturing labor shortage is structural, not cyclical. As of mid-2025, roughly 450,000 manufacturing positions remained unfilled in the United States, according to the U.S. Chamber of Commerce. Deloitte projects the gap will stretch to nearly two million openings by 2033. Manufacturing turnover sits around 31%, and participation rates continue to decline as baby boomers retire at a pace of roughly 10,000 per day. Canada faces a parallel challenge, with over 70% of organizations reporting difficulty filling skilled trades positions.

Mexico’s demographics are a mirror image. With a median age of 29, a population where 91% is under 65, and over two million new workers entering the labor force annually, Mexico offers the kind of scalable talent pipeline that simply doesn’t exist in the U.S. or Canada. This isn’t a temporary window. It’s a demographic advantage projected to last at least another decade. (We explored this in depth in our white paper, Solving the Labor Shortage: Why Mexico Is the Smartest Bet for Manufacturers.)

No trade agreement outcome changes these numbers. Whether the USMCA extends cleanly, gets revised, or enters annual reviews, Mexico’s workforce advantage persists. That’s why, despite all the uncertainty around the review, foreign direct investment into Mexico reached a record $40.9 billion through the first three quarters of 2025, a 15% increase over the prior year. Companies aren’t waiting for the review to conclude. They’re acting on fundamentals that exist independent of any agreement.

What You Should Actually Do Before July

Rather than trying to predict the outcome, focus on what you can control right now.

Know where you stand on USMCA compliance. If your exports don’t qualify under current rules, they almost certainly won’t qualify under whatever comes next. Every signal points toward tighter requirements, not looser ones. Understanding your current qualification status is the starting point for any planning. If you’re in the percentage that doesn’t qualify, it’s better to know now and consider alternative sourcing strategies while there’s time.

Map your supply chain origins. This sounds basic, but many manufacturers lack clear visibility into where their Tier 2 and Tier 3 inputs originate. If rules of origin tighten, particularly around automotive content or critical minerals, you need to know which components are at risk. Request detailed origin certifications from suppliers now, before the July deadline creates urgency.

Stress-test your cost model against multiple scenarios. The uncertainty around the review is real, but it doesn’t have to mean paralysis. The better approach is to understand where your tipping points are. At what tariff rate, content requirement, or labor cost threshold does your Mexico operation’s cost advantage narrow? Modeling these scenarios gives you a decision framework rather than a guess. At Tetakawi, this kind of scenario modeling is part of our cost analysis work, helping manufacturers understand how potential outcomes would affect their specific operation.

Stay ahead of evolving labor provisions. Labor standards under the USMCA have been a success story for North American manufacturing, with the Rapid Response Mechanism driving measurable improvements in wages and working conditions across facilities in Mexico. That momentum is expected to continue. Working with a partner who already manages HR and labor compliance at scale in Mexico makes this a non-issue for most manufacturers.

Get a customs analysis. The interaction between USMCA provisions, current tariff schedules, and your specific product classifications creates a complex picture. Understanding your actual duty exposure (not the headline rate, but what you’d actually pay under different scenarios) is essential for planning. We work with manufacturers on this kind of analysis regularly, and the gap between perceived and actual tariff impact is often significant.

The Wilson Center’s practical guide to the review offers a useful framework for thinking about preparation at the policy level. For operational preparation, the approach is simpler: know your numbers, understand your exposure, and have a plan for more than one outcome.

The Bottom Line

The USMCA review is a significant event, and it deserves serious attention. But it’s not the existential threat that some coverage implies. North American supply chains are deeply integrated. Automotive components alone cross the border multiple times before reaching a finished vehicle. All three countries have strong economic incentives to maintain the framework, even if the terms evolve.

The companies that navigate this well won’t be the ones who predicted the outcome correctly. They’ll be the ones who understood their own operations clearly enough to adapt quickly regardless of what happens in July. That means doing the due diligence now: compliance audits, supply chain mapping, cost scenario modeling, and customs analysis.

And it means recognizing that the case for manufacturing in Mexico was never built on a single trade agreement. It’s built on proximity, cost structure, and a labor force that’s younger, growing, and available at a scale that North America’s other two economies simply can’t match.

That advantage doesn’t expire in July.

Want to understand how the USMCA review could affect your operation?

Tetakawi helps manufacturers model cost scenarios, assess USMCA qualification, and run customs analyses specific to their products and supply chains. Contact us to start the conversation.

Related reading: How to Choose a Shelter Service Provider | Solving the Labor Shortage: Why Mexico Is the Smartest Bet

Frequently Asked Questions

Will the USMCA expire in 2026?

No. The July 2026 date is a review, not an expiration. Even if the parties don’t agree to extend, the USMCA remains in force through at least 2036, with annual reviews. The agreement only expires if no consensus is reached over that entire 10-year period.

Do the 25% tariffs apply to USMCA-qualifying goods?

No. The 25% tariff imposed in March 2025 applies only to goods that do not meet USMCA rules of origin. Qualifying goods continue to enter duty-free. The effective tariff rate on Mexican imports has been between 3.8% and 8%, far below the headline figure, because the majority of goods qualify.

What’s the most likely outcome of the review?

Most trade analysts expect the USMCA to be extended with modifications: likely tighter automotive rules of origin, new EV and critical minerals provisions, restrictions on Chinese-affiliated manufacturing, and stronger labor enforcement. A straight 16-year extension without changes is less likely given the current administration’s stated priorities.

Should I wait for the review outcome before expanding into Mexico?

That depends on your specific situation, but broadly: the structural reasons for manufacturing in Mexico (labor availability, proximity, cost structure) don’t depend on the review outcome. Companies that waited for certainty during previous trade transitions often found themselves behind competitors who moved earlier. The better approach is to understand your current USMCA qualification and model scenarios, then make an informed decision.