USMCA Will Not Auto-Renew: What the Renegotiation Means for Turkish Companies with North American Operations

The United States Trade Representative (USTR) has announced that the United States will not automatically renew the United States-Mexico-Canada Agreement (USMCA) in its current form when the agreement's six-year review period concludes. The agreement remains in force — there is no immediate disruption to trade flows — but the U.S. is actively seeking to renegotiate key provisions with Canada and Mexico.

For Turkish companies with North American supply chains, manufacturing operations, distribution agreements, or service contracts, this development requires immediate attention. The outcome of renegotiation could materially alter tariff rates, rules of origin, and market access conditions for goods and services moving across North American borders.

USMCA, which replaced NAFTA in July 2020, contains a built-in review mechanism: the three parties must jointly review the agreement every six years and decide whether to extend it for another sixteen years. If the parties do not agree to extend, the agreement enters a series of annual reviews until it either lapses or is renegotiated.

The U.S. decision not to auto-renew does not terminate USMCA — the agreement continues in force during the review and renegotiation process. However, it signals that the U.S. intends to use the review mechanism as leverage to extract concessions from Canada and Mexico on issues where the current agreement is seen as inadequate.

USTR has identified several priority areas for renegotiation:

The U.S. continues to run significant trade deficits with both Canada and Mexico. USTR has indicated that reducing these deficits — particularly in manufactured goods, automotive products, and agricultural commodities — is a central objective of renegotiation.

The automotive sector is the most complex and economically significant area of USMCA. The current rules require that a specified percentage of automotive content originate in North America and that a portion be produced by workers earning above a wage threshold. The U.S. is seeking to tighten these rules — potentially increasing the required North American content percentage and strengthening enforcement of the wage requirements.

For Turkish automotive suppliers with North American operations or customers, tighter rules of origin could affect the eligibility of vehicles and components for preferential tariff treatment.

The U.S. has longstanding disputes with Canada over dairy market access and with Mexico over agricultural subsidies and sanitary/phytosanitary measures. Renegotiation is expected to address these issues, with potential implications for agricultural trade flows and pricing.

The U.S. is seeking stronger provisions on energy trade, particularly regarding Mexico's state-owned energy sector and restrictions on U.S. energy investment in Mexico.

USTR has indicated interest in updating USMCA's digital trade and cross-border services provisions to reflect developments in e-commerce, data localization, and platform regulation since the agreement was negotiated.

The U.S. has used USMCA's rapid-response labor enforcement mechanism to challenge labor conditions at specific Mexican facilities. Renegotiation may seek to expand or strengthen this mechanism.

Turkish companies that manufacture goods in Mexico or Canada for export to the U.S. — or that source components from North American suppliers — face potential disruption if renegotiation results in:

• Higher tariffs on goods that currently qualify for USMCA preferential treatment
• Tighter rules of origin that disqualify goods currently meeting the existing thresholds
• New non-tariff barriers in sectors targeted by renegotiation

Turkish companies should map their North American supply chains to identify exposure: which products rely on USMCA preferential tariff treatment, what percentage of content originates in North America, and what the tariff cost would be if preferential treatment were lost.

Turkish automotive suppliers — including Tier 1 and Tier 2 suppliers with North American customers or operations — face particular exposure from potential changes to automotive rules of origin. Key questions:

• Do your products currently qualify for USMCA preferential treatment?
• What is the North American content percentage of your products?
• How would tighter rules of origin affect your qualification?
• Do your supply agreements with North American OEMs or Tier 1 customers include provisions addressing changes to trade agreement rules?

Turkish companies with distribution, agency, or service agreements covering North American markets should review their contracts for:

• Tariff change clauses: Does the agreement address what happens if tariffs change materially? Who bears the cost of additional duties?
• Force majeure and material adverse change provisions: Do these provisions cover changes in trade law or tariff regimes?
• Price adjustment mechanisms: Is there a mechanism to adjust pricing if input costs change due to tariff changes?
• Termination rights: Does either party have the right to terminate if trade conditions change materially?

For existing supply, distribution, and service agreements with North American counterparties, review:

1. Tariff and duty allocation clauses: Identify which party bears the cost of customs duties and whether the agreement addresses changes in duty rates
2. Price adjustment provisions: Determine whether there is a mechanism to adjust prices if input costs change due to tariff changes
3. Force majeure clauses: Assess whether changes in trade law or tariff regimes would qualify as force majeure events under the agreement's definition
4. Material adverse change provisions: Evaluate whether a significant tariff increase would constitute a material adverse change triggering renegotiation or termination rights
5. Governing law and dispute resolution: Confirm that the agreement's dispute resolution mechanism is adequate for trade-related disputes

For new supply, distribution, and service agreements with North American counterparties, include:

Trade-law change clause: A provision expressly addressing the risk of changes to USMCA or other applicable trade agreements, including:

• Allocation of the cost of additional duties between buyer and seller
• Price adjustment mechanism triggered by tariff changes above a specified threshold
• Notification obligations if a party becomes aware of pending trade law changes affecting the agreement
• Renegotiation or termination rights if tariff changes make the agreement commercially unviable

Rules of origin compliance: For goods that rely on USMCA preferential treatment, include:

• Representations and warranties that the goods meet applicable rules of origin
• Obligations to maintain documentation supporting rules of origin claims
• Notification obligations if rules of origin compliance is at risk
• Indemnification for losses arising from rules of origin failures

Customs compliance: Include representations and warranties regarding customs compliance, including accurate classification, valuation, and origin declarations.

Turkish manufacturers with North American operations should:

• Audit current USMCA qualification for all products
• Model the tariff cost if USMCA preferential treatment is lost
• Assess whether supply chain restructuring could maintain qualification under tighter rules of origin
• Review manufacturing agreements for tariff change provisions

Turkish logistics and distribution companies operating in North America should:

• Review customer contracts for tariff change and force majeure provisions
• Assess the impact of potential tariff changes on logistics economics
• Consider whether contracts need to be updated to address USMCA renegotiation risk

Turkish technology and service companies with North American operations should:

• Review cross-border service agreements for provisions addressing changes in trade law
• Assess the impact of potential new digital trade provisions on data localization and platform compliance obligations
• Monitor USTR's digital trade negotiating objectives for developments affecting technology services

The USMCA renegotiation process is expected to take months to years. Key milestones to monitor:

• Formal notification of renegotiation objectives by USTR
• Negotiating rounds between U.S., Canadian, and Mexican trade officials
• Congressional consultation requirements under U.S. trade law
• Stakeholder comment opportunities — USTR typically solicits public comments on trade agreement negotiations

Turkish companies should monitor these developments and be prepared to engage through industry associations, trade counsel, or direct comment submissions.

ULF New York advises Turkish companies, multinational corporations, and investors on U.S. trade law, USMCA compliance, supply chain structuring, and cross-border contract drafting. Contact us for a consultation on USMCA renegotiation risk and contract review.