Washington DC - The US has declined to renew a North American trade pact with Canada and Mexico in its current state, the US trade envoy said Wednesday, meaning the deal will now be reviewed annually.

The move is likely to fuel uncertainty for businesses, given the deep integration across North American supply chains in sectors like automobiles.

But the US-Mexico-Canada Agreement (USMCA) remains in force for another 10 years even if not extended by Wednesday's deadline.

The free trade pact will instead be subject to annual reviews, unless a country decides to withdraw entirely.

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"The United States did not agree to renew the USMCA in its current form. As a result, the USMCA is not renewed," US Trade Representative Jamieson Greer said in a statement.

"The United States will continue to engage with Mexico and Canada to address the agreement's shortcomings and our trade deficits with these countries," he added.

A senior US official told reporters that US trade gaps were a key concern, alongside market access opportunities. The official flagged tensions in areas like dairy and corn.

Mexico's economy secretary, Marcelo Ebrard, confirmed the impasse but said there were no insurmountable differences to resolve. He noted that Washington's pending complaints over the agreement have dropped from 54 in 2025 to 14.

On Wednesday, the USTR held a virtual meeting with Ebrard and Ottawa's minister in charge of Canada-US trade, Dominic LeBlanc.

The Trump administration's decision not to extend the pact was widely expected.

President Donald Trump said in June that he was not "looking to renew" the agreement despite signing and praising it in his first term.

Canada and Mexico had both called for a 16-year renewal of the USMCA.

With the deal subject to rolling negotiations instead of a longer-term extension, talks could last for months or years over everything from tariffs to trade rules governing specific sectors.

Despite a 10-year countdown to the deal's expiration, the senior US official said countries need not wait a decade to conclude their agreement.

"I think we need to come to a conclusion quickly, if possible," the official added.

Analysts say the development does not change day-to-day trade between the countries for now.

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But KPMG senior economist Benjamin Shoesmith told AFP: "This definitely will have a large impact on investor sentiment, not just in the US but investing into Mexico in particular."

Mexico has benefited from businesses seeking to benefit from North American supply chains.

Shoesmith expects the auto sector to be top-of-mind in negotiations, alongside energy.

Still, analysts expect the USMCA to survive, with goods and services trade within North America amounting to nearly $2 trillion in 2024.

Even as Trump unleashed tariffs on trading partners last year, he made critical exemptions for USMCA products.

American Automotive Policy Council President Matt Blunt stressed that "North American economic integration enables enormous competitive benefits for the region."

But Brian Bryant of the International Association of Machinists and Aerospace Workers union urged for tougher labor standards, alongside "measures that discourage corporations from moving jobs out of the United States and Canada in pursuit of cheaper labor."

Underscoring other concerns, the Alliance for American Manufacturing called for "robust rules of origin" as a roadblock to Beijing's access to the US auto market.

The US and Mexico have held two rounds of bilateral trade talks, with a third due in the week of July 20.

Mexico has sought to reduce US tariffs on steel, aluminum and autos after Trump slapped sharp duties on steel, aluminum and copper imports.

While Greer did not unveil a schedule for formal talks with Canada, he has met with LeBlanc.

The USMCA was implemented in 2020, replacing NAFTA, the North American Free Trade Agreement. It helped lower or remove tariffs and other trade barriers on many products traded between the three countries.