MEPS: USMCA uncertainty could keep US steel prices elevated for longer

Uncertainty surrounding the future of the United States-Mexico-Canada Agreement (USMCA) could continue to support high US steel prices and prolong trade tensions across North America, according to an analysis by MEPS International.

The agreement reached a review deadline on July 1, but while Canada and Mexico agreed to extend the existing framework, the United States withheld its approval, triggering an annual review process and opening the door to further negotiations on key provisions.

Trade uncertainty grows

According to MEPS, the US decision was not entirely unexpected given previous statements from the Trump administration indicating that it was prepared to withhold approval for the agreement in its current form.

"The US decision was not entirely unexpected," said Laura Hodges, US steel market analyst at MEPS International. "That said, it does begin a period of heightened uncertainty and may strengthen the United States' negotiating leverage as discussions over the future of USMCA continue."

The United States cited trade deficits, supply chain security concerns and a desire to strengthen domestic manufacturing and tighten rules of origin requirements as reasons for withholding approval. In 2025, the US recorded goods trade deficits of approximately USD 46 billion with Canada and USD 197 billion with Mexico.

Lower likelihood of Section 232 relief

According to MEPS, reducing the 50% Section 232 tariffs on steel, aluminium and automobiles has been a major objective for both Canada and Mexico during recent discussions with Washington.

"While changes to the Section 232 tariffs cannot be ruled out completely, the decision not to renew the USMCA in its current form also lowers the likelihood of a reduction in the existing 50% tariff on steel," Hodges said.

The research group noted that the US decision does not terminate the agreement, which remains in force until July 1, 2036, unless one of the parties formally withdraws.

Diverging steel market conditions

MEPS argues that the uncertainty is likely to reinforce the divergence between steel markets in the three countries. Reduced imports and relatively stable demand have tightened steel supply in the US market, supporting domestic prices, while Canadian and Mexican producers continue to face weaker export opportunities and subdued domestic demand.

According to MEPS data, US hot rolled coil prices in June were more than 58% higher than in January 2025, before the reintroduction of blanket Section 232 tariffs.

The organization also noted that uncertainty surrounding future trade rules could delay investment decisions by steel-consuming industries, particularly in Mexico, where nearshoring has been a major driver of manufacturing growth in recent years.

Rules of origin in focus

Negotiations between the United States and Mexico are continuing, with further talks scheduled for later this month in Mexico City. Discussions have focused on rules of origin, supply chain security and industrial cooperation.

One of Washington's key objectives is reportedly to tighten automotive rules of origin requirements. Under the current USMCA framework, 75% of a vehicle's content must originate in North America to qualify for preferential tariff treatment. According to MEPS, the US is seeking to increase this threshold to 82% and introduce a requirement that 50% of vehicle components be manufactured in the United States.

Source: MEPS, Photo: Fotolia