The Future of North American Trade

With the U.S.-Canada-Mexico Agreement coming up for review, our Head of Public Policy Research Ariana Salvatore unpacks whether our 2025 call for deeper trade integration still holds.

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Ariana Salvatore: Welcome to Thoughts on the Market. I'm Ariana Salvatore, Head of Public Policy Research for Morgan Stanley. 

Today I'll be talking about our expectations for the upcoming USMCA review, and how the landscape has shifted from last year. 

It's Wednesday, February 11th at 4pm in London. 

As we highlighted last fall, the US-Mexico-Canada Agreement is approaching its first mandatory review in 2026. At the time, we argued that the risks were skewed modestly to the upside. Structural contingencies built into the agreement we think cap downside risk and tilt most outcomes toward preserving and over time deepening North American trade integration. 

That framing, we think, remains broadly intact. But some developments over the past few months suggest that the timing and the structure of that deeper integration could end up looking a little bit different than we initially expected. We still see a scenario where negotiators resolve targeted frictions and make limited updates, but we're increasingly mindful that some of the more ambitious policy maker goals – for example, new chapters on AI, critical minerals or more explicit guardrails on Chinese investment in Mexico – may be harder to formalize ahead of the mid-2026 deadline. 

So, what does the base case as we framed it last year still look like? 

We continue to expect an outcome that preserves the agreement and resolves several outstanding disputes – auto rules of origin, labor enforcement procedures, and select digital trade provisions. 

On the China question, our view from last year also still holds. We expect incremental steps by Mexico to reduce trans-shipment risk and better align with U.S. trade priorities, though likely without a fully institutionalized enforcement mechanism by mid-2026. And remember, the USMCA’s 10-year escape clause keeps the agreement enforced at least through 2036, meaning the probability of a disruptive trade shock is structurally quite low. 

What may be shifting is not the direction of travel, but the pace and the form. A more comprehensive agreement may ultimately come, but possibly with a longer runway or through site agreements rather than updates to the USMCA text itself. Of course, those come with an enforcement risk just given the lack of congressional backing. 

We still expect the formal review to conclude around mid-2026, albeit with a growing possibility that deeper institutional alignment happens further out or via parallel frameworks. It also is possible that into that dea