U.S. auto industry faces increased uncertainty without extension of USMCA trade deal

The U.S. automotive industry is entering a new phase of uncertainty as the Trump administration said the USMCA trade agreement between the United States, Mexico and Canada will not be extended by Wednesday, triggering what could be a yearslong review process or an expiration of the pact if no deal is reached by 2036.

The United States-Mexico-Canada Agreement, which replaced the North American Free Trade Agreement, was established during President Donald Trump's first term in 2020, but the administration has soured on the deal that governs roughly $2 trillion annually in goods and services between the three countries.

The auto industry represented about 18% of America's trading with its neighboring countries last year, according to industry data, making it one of the key sectors in the discussions. Automakers and others watching the talks are concerned that reopening the deal could create additional trade uncertainty that leads to lower investments and fewer jobs.

"If we let this go on for a very long time, it's very painful for everyone," said Diego Marroquín Bitar, a fellow at the Washington, D.C.-based think tank Center for Strategic and International Studies. "That's the last thing that the region needs."

There's also concern that the U.S. could pull out of the deal amid aggressive negotiation tactics by the Trump administration involving tariffs, trade and other issues.

The United States, Mexico and Canada could have agreed to a 16-year extension by Wednesday but will go to an annual review process instead.

U.S. Trade Representative Jamieson Greer in May said the U.S. wants to strengthen North American rules of origin "in a way that enhances U.S. content in these goods" to boost domestic manufacturing.

Bitar also said the Trump administration's public discussions have been wide-ranging, touching on nontrade issues such as immigration, crime and other connections, which could make this round of talks more challenging than when USMCA was established.

"Everything is on the table. Not just the trade issues," Bitar said. "The more things on the table, the longer it takes to negotiate and the more uncertainty it will generate."

The U.S. automotive industry has already dealt with a lot of uncertainty this decade, from pandemic production stoppages and supply chain shortages to ongoing changes to tariffs and other regulations. Now it's bracing for the reopening of USMCA talks.

It's not clear whether vehicles that meet compliance measures for the U.S. would continue to face tariffs, which Trump has used aggressively during his presidency as leverage in negotiations and to promote domestic production.

"All chips are on the table," Aakash Arora, an automotive expert, partner and managing director at Boston Consulting Group, told CNBC. "But what is clear across all scenarios being discussed is No. 1: higher content from the U.S."