The agreement governing trade across North America is being rewritten. The July joint review of the United States–Mexico–Canada Agreement (USMCA) isn’t expected to be quick or smooth and will likely mark a shift from a rules-based trade framework to a more politicised, security-driven economic pact. Companies will need sharper geopolitical insight, forward-looking scenario analysis and active monitoring to navigate rising regulatory and political complexity.
Since coming into force in 2020, the USMCA has underpinned nearly USD 2tn in annual trilateral trade. Its importance is particularly pronounced for Mexico, where linked business accounts for roughly 55% of GDP. Investors will be watching negotiations to see how the agreement’s evolution will alter market conditions, from compliance costs and supply chain design to political exposure and regulatory volatility. Understanding how policy shifts translate into operational risk will be critical to protecting margin and sustaining growth.
Despite elevated political tensions, a full breakdown of the USMCA remains unlikely. The agreement is likely to be extended for another 16 years, albeit with amendments and stricter enforcement. But the review process is expected to extend well beyond the July 1 deadline, and parties are more likely to reach a preliminary understanding rather than a comprehensive agreement. This introduces an additional layer of regulatory uncertainty, directly affecting capital allocation, supply chain configuration and market entry decisions. Companies will need to continuously reassess exposure as policy direction evolves, not just at key milestones, but throughout the negotiation process.
Points of friction
The defining dynamic shaping the negotiations is the increasing politicisation of trade policy, particularly in the US. Under a more assertive economic security framework, President Donald Trump is using trade policy to address broader concerns, including migration, supply chain resilience and geopolitical competition. This shift expands the definition of “trade risk” beyond tariffs and quotas, requiring companies to assess exposure across political, regulatory and security domains. Businesses operating in North America will increasingly need to anticipate how non-trade issues could affect licensing, market access and cross-border operations.
A second point of friction concerns US efforts to curb Chinese economic influence in North America and prevent the use of Mexico as a platform for indirect access to US markets. Mexico has already made concessions to align with US concerns, particularly by limiting Chinese overcapacity in sectors such as steel and textiles. Canada, by contrast, has shown less willingness to align fully with US economic security priorities, as it continues to diversify trade and investment partnerships to reduce dependence on the US. For multinational companies, this creates immediate pressure to reassess supply chain dependencies, joint ventures and investment structures that could fall within the scope of future restrictions.
Diverging domestic political dynamics will further complicate negotiations.
- The US is adopting a pressure-driven approach, using tariffs and regulatory leverage to extract concessions.
- Canada is seeking to de-escalate tensions and preserve the agreement while defending sensitive sectors such as dairy. Managing internal provincial divisions will also reduce its flexibility during negotiations.
- Mexico is pursuing a pragmatic strategy, deepening integration with the US while signalling alignment on security priorities and limiting exposure to Chinese investment.
These diverging national strategies increase the likelihood of policy fragmentation across North America. For investors, this raises the risk of inconsistent regulatory enforcement, sudden policy shifts and competing compliance requirements across jurisdictions, particularly for companies operating integrated regional business models.
What changes could mean for business and investors
- The review is expected to reshape supply chain strategies. A blanket prohibition of Chinese investment remains unlikely, but it will almost certainly result in tighter rules of origin. This will require companies to reassess ownership structures, sourcing decisions and investment partnerships.
- Firms that fail to adapt early risk higher compliance costs, disruption to production and potential loss of market access. Sectors such as automotive manufacturing, electric vehicles (EVs) and electronics are particularly exposed, and are likely to face stricter input traceability requirements and potential caps on Chinese components.
- The new USCMA will materially increase the complexity of operating within it. Tariff-free trade will most likely remain largely intact, reflecting strong economic incentives to preserve regional integration despite political tensions.
- For investors, the key risk is the gradual accumulation of regulatory, political and operational pressures that erode efficiency and increase costs over time.
- Organisations that take a proactive, intelligence-led approach will be better positioned to protect value and identify opportunity. Successfully navigating this environment will require continuous monitoring of policy developments, forward-looking scenario analysis and the ability to translate geopolitical shifts into clear business decisions.
Control Risks supports clients with real-time geopolitical monitoring, scenario modelling and strategic advisory to help them anticipate policy shifts, manage risk exposureand make confident investment decisions in complex operating environments.