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The Trump administration’s top trade negotiator outlined priorities for an anticipated 2026 renegotiation of the free trade agreement governing the majority of trade between the U.S., Canada and Mexico.
In a congressional briefing document made public on Dec. 17, U.S. Trade Representative Jamieson Greer outlined administration priorities in addressing “structural issues” around the update of the North American Free Trade Agreement (NAFTA) that Greer helped negotiate as part of the first Trump administration. The update included an unusual six-year deadline on July 1, 2026, for the three countries to review and potentially revise the comprehensive free trade agreement, now known as the U.S.-Mexico-Canada Agreement (USMCA).
The ambassador’s briefing comes after weeks of public remarks by Greer signaling that President Donald Trump could seek to end the USMCA, possibly in favor of nonbinding bilateral trade frameworks with Canada and Mexico. That would upend a free trade agreement which applied to nearly $2 trillion in annual goods and services trade volume for the U.S. alone in 2024.“Could it be exited? Yeah, it could be exited. Could it be revised? Yes. Could it be renegotiated? Yes,” said Greer at an event held by a D.C.-based think tank on Dec. 10. “All of those things are on the table.”
Greer suggested that separate nonbinding bilateral trade frameworks, which he has defended as more expedient than legally binding free trade agreements such as the USMCA, could replace the existing continental free trade agreement.
“Our economic relationship with Canada is very, very different than our economic relationship with Mexico,” Greer argued as reason to negotiate separately.
In his lengthy prepared remarks to lawmakers, delivered on Dec. 16 and 17, Greer did not explicitly say that he supports the U.S. remaining a part of USMCA though he highlighted stakeholder feedback, including in favor of the North American pact. But he also said the administration believes “structural issues” that include significant domestic policy changes in Canada and Mexico will be necessary.
According to Greer these changes include Canada continuing to hold off on its digital services tax and repealing two laws related to digital services and technology regulation. Greer cited Canada’s DST pause and a partial rollback of Canadian tariffs on U.S. products — a retaliation for those levied on Canadian products by the Trump administration earlier this year — as progress.
Greer also emphasized “[e]nhancing economic security alignment on tariffs, export controls, and investment screening,” as other major structural issues to address in the joint review. This includes stronger rules of origin for non-automotive industrial goods and changing Mexican policies around foreign direct investment and third-party trade that the administration argues allow too many products from China and other non-USMCA countries into the free trade area. Greer touted as progress a Mexican legislative proposal, recently advanced by that country’s senate, that will raise tariffs on more than 1,400 products from non-USMCA countries.
The Trump administration also wants “mechanisms to penalize offshoring of U.S. production to Mexico or Canada as the result of regulatory and other arbitrages.”
Grant Thornton insight:
Lawmakers speaking to press after Greer’s Dec. 17 briefing indicated they did not think the administration would attempt to pull the U.S. out of the agreement, but the president could still push such a move, despite legal, political and economic challenges to doing so. Trump, who has said he dislikes multilateral agreements, initiated an attempt to withdraw from NAFTA during his first administration, before renegotiating it. He may see a threat of withdrawal from the USMCA as leverage in talks. However, there is still strong stakeholder and investor support for remaining in the pact, and any adverse investor and economic impact of withdrawal in the U.S. could weigh on the president’s decision.
The USMCA contains a joint review provision under which each country must affirm its intent to continue the agreement. The deadline for this initial review is July 1, 2026. There also is a separate withdrawal mechanism under which any party can leave the agreement after providing six months’ notice, though members of Congress and the Trump administration may differ as to whether the president can unilaterally leave a trade agreement that Congress ratified, due to powers over trade and treaties granted to Congress under the Constitution.
Free trade agreements are intended to lower tariffs and other trade barriers, so Canada and Mexico will likely prioritize an end to tariffs affecting their products, which were levied by the Trump administration earlier this year. Trump has repeatedly stated that he intends tariffs to replace income taxes, an agenda at odds with free trade, though the official legal rationale behind the Canada and Mexico tariffs has been cross-border security issues. Still, the administration has lowered tariffs on several countries after negotiating nonbinding trade frameworks.
The administration could follow that pattern again if it follows through on renegotiating, or withdrawing from, the USMCA. With several trade investigations ongoing, the Trump administration has laid the groundwork for even more tariffs on select products such as pharmaceuticals, medical devices and semiconductors in 2026, though it could continue to carve out items it considers USMCA-compliant.
Grant Thornton insight:
Continued threats or actual withdrawal from the USMCA will add to supply chain uncertainty for many companies and products, as Canada and Mexico are the U.S.’s two largest individual-country trading partners.
NAFTA serves as the basis for USMCA, as the agreement has been known for the last six years, and was updated during the first Trump administration, mainly around digital trade, market access and labor issues. However, the president threatened tariffs on Mexico, in violation of the agreement, over immigration issues in 2019. He also began to withdraw the U.S. from NAFTA in 2018 order to speed congressional action necessary to implement changes made by USMCA (though Congress could have challenged the legality of the administration withdrawing from a legally binding treaty without congressional consent).
Though ostensibly ordered for different reasons, the tariffs imposed by the administration on Canadian and Mexican imports since the first quarter of 2025 exist in the context of the USMCA renegotiation that the current administration referenced as Trump again took office. The constitutionality of unilateral withdrawal could be challenged, but the administration has already pushed the bounds of existing law to facilitate its attempt to restructure global trade and could follow through. Such action could be either a negotiating tactic or a desired outcome (as Greer suggested in his remarks on the possibility of replacing the USMCA with separate, nonbinding bilateral trade frameworks).
Businesses with supply or export chains extending to Canada and Mexico may be encouraged that members of Congress characterized Greer’s remarks as a preference to stay in the USMCA, and lawmakers from both parties want the agreement to continue. However, the president does not see eye-to-eye with many members of his own party on trade and has shown a willingness to disrupt decades of consensus U.S. policy and relationships with allies and significant trade partners. Major uncertainty about the administration’s course of action in 2026 remains.
USTR warns EU over treatment of U.S. service providers
The Office of the U.S. Trade Representative issued an ultimatum over what it says are “discriminatory and harassing lawsuits, taxes, fines, and directives against U.S. service providers,” in a Dec. 16 statement, naming several large European multinational companies as potential targets of U.S. retaliation.
The statement came as the U.S. and its G7 counterparts attempt to finalize an agreement exempting U.S. companies from parts of the Pillar 2 global tax agreement.
To date, the trade wars initiated by the Trump administration have focused on physical goods rather than cross-border services, though the statement from USTR indicated that could change. The U.S. enjoys annual trade surpluses in services, exporting nearly $293 billion more services than it imported in 2024.
Escalation around tax, fees or market access for U.S. multinational firms is not out of the ordinary under President Donald Trump. The first Trump administration threatened retaliatory tariffs on items such as wine and cheese over France’s digital services tax, which disproportionately affected large U.S. tech companies. USTR’s statement indicated it could aim a similar retaliatory effort at the entire European Union, negatively impacting the world’s single largest trade relationship in the world.
“If the EU and EU Member States insist on continuing to restrict, limit, and deter the competitiveness of U.S. service providers through discriminatory means, the United States will have no choice but to begin using every tool at its disposal to counter these unreasonable measures,” the statement continued, noting that, “U.S. law permits the assessment of fees or restrictions on foreign services, among other actions.”
Earlier this year, congressional Republicans sought to create a new retaliatory tax measure, Section 899, within the economic package known as the One Big Beautiful Bill Act (OBBBA). The proposal was dropped from the legislation when the G7 agreed to support the Pillar 2 exemption now being negotiated. However, House Ways and Means Committee Chair Jason Smith, R-Mo., has threatened to revive the idea if there isn’t meaningful action on the Pillar 2 deal for the U.S.
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