US Declines USMCA Renewal, Launching New Trade Negotiation Era for North American Manufacturing

The United States has declined to renew the United States-Mexico-Canada Agreement (USMCA) in its current form, triggering a new phase of negotiations that will reshape trade relations across North America. The decision follows the mandatory six-year review of the agreement and starts a ten-year countdown to its expiry, unless all three countries unanimously agree to renew or amend the deal during annual reviews.

Introduced in 2020 to replace the North American Free Trade Agreement (NAFTA), USMCA governs one of the world’s largest free trade areas. The agreement underpins highly integrated supply chains across manufacturing industries, including automotive, textiles, and footwear. By introducing new rules on digital trade, labor standards, and automotive production, USMCA updated NAFTA while maintaining duty-free trade for most qualifying goods. Now, that framework is open for renegotiation.

US Trade Representative Jamieson Greer has indicated that the administration is seeking changes to address persistent US trade deficits with Canada and Mexico, as well as to strengthen North American manufacturing. Upcoming talks with Mexico are expected to focus on tighter rules of origin and measures to reinforce regional supply chains and economic security. Proposed changes include increasing regional content requirements for vehicles and introducing stricter US content thresholds.

For the footwear and leather industries, the USMCA renegotiation carries significant implications. North America is a major market for leather goods, footwear, and related products. Supply chains in the sector cross borders frequently, with raw materials, semi-finished goods, and finished products moving between the US, Mexico, and Canada. Any tightening of rules of origin or content requirements could affect how and where leather products are sourced and manufactured.

Mexico, in particular, has emerged as an important footwear manufacturing hub, producing both for domestic consumption and for export to the United States. Tanneries and footwear factories in Mexico rely on hides from the US beef industry, creating an integrated leather supply chain that spans the border. If new USMCA negotiations result in stricter content requirements, manufacturers may need to adjust their sourcing strategies, potentially increasing costs or requiring new supply chain configurations.

Canada and Mexico have signaled their willingness to extend the agreement and emphasized that negotiations will continue. However, officials have warned that a prolonged period of annual reviews could create uncertainty for businesses and discourage investment across North America’s manufacturing base. That uncertainty is already a concern for industries that require long-term capital investment, such as tannery modernization and footwear factory construction.

The broader context is one of shifting global trade patterns. The US administration’s strategy of reshoring manufacturing and reducing dependence on overseas suppliers has already affected trade relationships with China and other Asian economies. The decision to open USMCA for renegotiation extends that approach to North American trade, suggesting that the administration views trade deficits as a problem to be addressed through bilateral and regional negotiation rather than multilateral frameworks.

For leather and footwear companies operating in North America, the key question is how new rules might affect their cost structures and competitive positioning. Stricter rules of origin could benefit US-based producers by requiring more North American content, but they could also raise costs for brands that currently source materials globally. The outcome will depend on the specific terms negotiated and how they are implemented.

The USMCA renegotiation is likely to be a prolonged process, with multiple rounds of talks and significant political maneuvering. Companies in the leather and footwear sectors should monitor developments closely and consider scenario planning for different outcomes. In the meantime, the agreement remains in force, and existing supply chain arrangements continue to operate under current rules.

Source: World Footwear (worldfootwear.com)