USMCA renewal faces obstacles: North American agricultural supply chain enters new phase of uncertainty

Why Is the Refusal to Renew USMCA Drawing Attention?

On July 1, 2026, U.S. Trade Representative James Greer clearly stated after a trilateral review meeting that the United States would not agree to renew the United States-Mexico-Canada Agreement (USMCA) in its current form. While this decision does not immediately terminate the agreement (which remains in effect until 2036), it casts a long shadow over the North American integrated agricultural trade system. For industries heavily reliant on zero-tariff cross-border flows of grains, oilseeds, livestock, and processed foods, policy uncertainty is evolving from a risk variable into a structural problem.

Who Will Benefit? Who Will Face Pressure?

In the short term, localized producers in Mexico and the United States may benefit. With lower labor costs and nearshoring advantages, Mexico is attracting multinational food processors to shift production capacity from Asia to North America—but only if USMCA rules of origin remain unchanged. If rules tighten in the future, Mexican agricultural exports to the U.S. (such as avocados and tomatoes) will be the first to suffer.

The groups facing the most pressure are export-oriented farmers in Canada and the United States. Canada exports tens of billions of dollars worth of grains, canola, and pork to the U.S. each year, while the U.S. exports large quantities of corn and soybeans to Mexico. Any restoration of tariffs or increase in non-tariff barriers would directly impact farm profits. Additionally, the supply chains of major U.S. agribusinesses (such as Cargill and ADM) span all three countries; policy volatility will force them to increase inventory costs or seek alternative markets.

Why Is the U.S. Refusing to Renew?

Greer cited the "trade deficit" and "flaws" in the agreement, behind which lies the inherent contradiction between the U.S. manufacturing reshoring policy and agricultural liberalization. The USMCA negotiated under Trump strengthened automotive rules of origin but maintained a large amount of zero-tariff access for agriculture. The Biden administration continued the "America First" approach, believing that the current agreement has failed to prevent the widening U.S. agricultural trade deficit with Mexico (especially in dairy and pork). Moreover, in the U.S. domestic political landscape, the balance between the export interests of key agricultural states (such as Iowa and Minnesota) and the manufacturing interests of the "Rust Belt" is shifting.

What Does This Mean for the Supply Chain?

The North American agricultural supply chain is highly integrated: the U.S. exports feed grains to Mexico and Canada, Canada exports canola to the U.S. for processing, and Mexico exports fresh fruits and vegetables to the U.S. Trade friction at any link will cause ripple effects. For example, if the U.S. imposes tariffs on Canadian pork, U.S. processing plants may face raw material shortages, while Canadian hog farmers would be forced to find markets in China or Japan. This uncertainty has already led some companies to delay cross-border investments: Canadian beef processors have suspended expansion plans, and Midwestern U.S. grain traders have reduced long-term contracts across the U.S.-Canada border.

Future Trends: Fragmentation or Reintegration?

In the next 3-5 years, the USMCA framework will still exist as a "safety net," but the three countries may alleviate tensions through bilateral negotiations or sectoral agreements.Within 3-5 years, the USMCA framework will still exist as a "safety net", but the three countries may ease tensions through bilateral negotiations or sectoral agreements. The most likely scenario is: the US launches a "Section 232" investigation on specific agricultural products (such as dairy) to force Canada and Mexico to make concessions; Canada accelerates trade diversification with the EU and Asia-Pacific; Mexico uses the dispute settlement mechanism under Chapter 34 of the USMCA to challenge US actions. In the long term, the North American agricultural supply chain will shift from "highly integrated" to "conditional regionalization", and companies need to establish multi-source procurement plans—for example, US retailers may import avocados from both Mexico and South America, while Canadian canola processing plants will increase their export share to the EU.

What does it mean for investors?

Agricultural commodity futures markets will become more sensitive to political signals from the three countries. Investors should focus on: 1) price spread fluctuations between US CBOT corn, soybeans and Canadian canola; 2) the sensitivity of the Mexican peso exchange rate to agricultural trade; 3) supply chain exposure of listed agricultural companies (such as Tyson Foods, Maple Leaf Foods). In the long term, North American agricultural infrastructure assets (such as port silos, border cold storage facilities) may become safe-haven investments, as trade uncertainty actually increases turnover efficiency requirements.

Key Observations

1. The US refusal to renew is essentially a political signal: It aims to pressure for renegotiation, not withdrawal, but long-term uncertainty has already substantially damaged investment confidence. 2. Agriculture is the biggest victim: An industry highly dependent on rule stability cannot quickly shift production capacity like the automotive industry. 3. Canada and Mexico will strengthen bilateral cooperation: They may sign bilateral agricultural agreements bypassing the US (such as dairy trade between Canada and Mexico), but on a limited scale. 4. Corporate supply chain strategies shift to "resilience first": Inventory levels rise, contract durations shorten, and alternative sourcing regions increase. 5. The USMCA dispute settlement mechanism faces tests: The number of cases will surge in the future, testing the legal efficiency of the three countries.

Long-term Trend Outlook

In the next 3-5 years, North American agricultural trade may show "limited fragmentation": the US imposes quotas or seasonal tariffs on some agricultural products; Canada expands canola exports to China, but given geopolitical risks, it is difficult to rely entirely on a single market; Mexico uses its USMCA membership and geographic advantages to become an "agricultural product transit hub" in the US-China trade war. The real structural change will occur after the 2028 US presidential election—if protectionist forces persist, the USMCA may be renegotiated into a more flexible but weaker framework, similar to a "North American Trade and Investment Agreement" (NATIP), allowing countries to retain more policy space in agriculture. For companies, this means that "political risk" must be incorporated into daily operational models: the efficiency dividends brought by North American agricultural integration over the past 20 years are fading, while geopolitical costs are rising.