Allowing the US-Mexico-Canada Agreement to lapse without renewal would increase taxes by $466 billion over the next decade and shrink US economic output by 0.1 percent, according to a report published June 23, 2026, by the Tax Foundation. The analysis finds that ending USMCA exemptions from current tariffs would cost the average American household roughly $300 in 2027 alone and reduce hours worked by the equivalent of 95,000 full-time jobs. With the agreement's first review deadline arriving July 1, 2026, and President Trump indicating he won't renew it in its current form, the report warns that trade policy uncertainty is already elevated and poised to climb higher.
The agreement has become significantly more important to US importers since President Trump's tariff regime took effect. USMCA compliance surged from 44 percent of imports in 2024 to 67 percent in 2025, peaking at 89 percent in October 2025 and remaining above 80 percent so far in 2026. Between June and July 2025 alone, compliant imports from Mexico jumped 83 percent and from Canada by 62 percent as importers rushed to file compliance paperwork to avoid tariffs. Together, Canada and Mexico accounted for more than $1.8 trillion in goods and services trade in 2024, largely supporting manufacturing, agriculture, and energy sectors. The Tax Foundation estimates that under the scenario modeled—ending USMCA exemptions—imports currently shielded from Section 232 tariffs on autos, auto parts, and trucks would face a 25 percent rate, while other USMCA imports would face a 10 percent rate.
The report finds that the tariffs currently in place will cost American households about $700 this year and reduce long-run GDP by 0.3 percent. According to the Tax Foundation's modeling, ending the USMCA exemptions would reduce long-run GDP by an additional 0.1 percent beyond the existing tariff damage. The authors note that if the US, Mexico, and Canada fail to reach agreement for a clean extension by July 1, "that failure would trigger a series of annual reviews" and without consensus, the agreement would expire at the end of its 16-year term in 2036. The Trump administration's stated grievances include the trade deficit with Canada and Mexico, Chinese exports routing through Mexico, and lack of access to the Canadian market for US dairy exports.
USMCA modernized the North American Free Trade Agreement by focusing on non-tariff barriers in digital services, e-commerce, and intellectual property while maintaining zero tariff rates on most goods. The report explains that after tariffs took effect in March 2025, President Trump announced a 30-day exemption for USMCA-covered imports, which was then extended indefinitely, partially insulating US importers from the tariff shock. The United States International Trade Commission originally estimated that USMCA would boost long-run GDP by 0.35 percent and increase US employment by 176,000 jobs when it took effect in July 2020. The exemption's importance became clear as compliance rates nearly doubled once the tariff threat materialized, demonstrating how much US businesses rely on tariff-free access to Canadian and Mexican goods.
With the current Section 122 tariff set to expire in July and Section 301 tariffs on the horizon, the report concludes that policymakers have no reason to compound uncertainty by stalling USMCA renewal or following through on the president's threat to withdraw from the agreement altogether. Nearly 2 million jobs across the US are supported by trade with Canada and Mexico, making the agreement vital to the American economy even as negotiators face pressure to extract new concessions or shift toward bilateral deals instead of the trilateral framework.