The United States announced July 1 that it will not renew the U.S.-Mexico-Canada Agreement in its current form, triggering a new annual review process for the trade pact that governs a large share of the cross-border supply chain feeding the North American HVAC industry.
The announcement came from the Office of the U.S. Trade Representative, led by Jamieson Greer, which stated that "the United States did not agree to renew the USMCA in its current form. As a result, the USMCA is not renewed." The decision arrived on the agreement's sixth anniversary, the date on which USMCA's built-in "joint review" or sunset provision required the three member countries to formally assess whether to continue the pact toward its scheduled 2036 expiration.
What the Non-Renewal Actually Changes
USMCA remains in force while the U.S., Mexico and Canada continue negotiations, according to the administration. Rather than confirming a new multi-year term, the three countries must now meet annually to discuss possible revisions until either an agreement is reached or the pact expires on its original 2036 timeline. The practical effect is that instead of a fixed, multi-year renewal locking in trade terms, the agreement now faces the possibility of a revision or renegotiation at each annual review point.
For the HVAC industry, that shift matters because a substantial share of residential and commercial HVAC equipment installed in the United States is manufactured in Mexico, and Canadian steel and aluminum feed into equipment production on both sides of the border. USMCA's duty-free treatment for qualifying goods has historically shielded much of that trade from tariffs that apply to non-USMCA-compliant imports.
USMCA took effect July 1, 2020, replacing the North American Free Trade Agreement, and included the six-year joint review requirement as a first-of-its-kind sunset mechanism in a U.S. free trade agreement, intended to force a periodic reassessment of the pact rather than leaving it in place indefinitely. This year's review was the first test of that mechanism, and the decision not to renew marks uncharted territory for a trade relationship that manufacturers across the HVAC supply chain have built multi-year sourcing and production strategies around.
Tariffs Already in Motion Separately From USMCA
The USMCA decision comes weeks after the administration separately reduced Section 232 tariffs on HVAC-related steel, aluminum and copper imports from 25% to 15%, effective June 8 through 2027. That reduction applied to a category of equipment that includes residential HVAC systems and was framed by the administration as relief for manufacturers and contractors facing elevated input costs. The USMCA non-renewal does not reverse that tariff reduction, but it does mean the broader framework under which USMCA-qualifying HVAC trade has flowed duty-free is now subject to annual reexamination rather than long-term certainty.
Industry Reaction and Uncertainty
Trade attorneys and industry analysts have noted that the annual review structure creates planning challenges distinct from a one-time tariff change. Because manufacturers, distributors and contractors typically plan production runs, inventory positioning and multi-year equipment pricing around a stable trade framework, a policy environment where the rules are subject to yearly reassessment complicates long-range forecasting for OEMs that rely on Mexican manufacturing capacity for compressors, coils and finished units.
Several major HVAC manufacturers operate significant production capacity in Mexico, including facilities that produce finished residential systems, compressors and components that cross the border multiple times during assembly before reaching U.S. distributors. An annual review cycle, rather than a fixed long-term framework, means those supply chains now face the prospect of renegotiated terms on a yearly basis rather than being able to plan against a known set of rules through 2036, the agreement's outer expiration date absent a future renewal.
What's Next
The first annual review under the new process has not yet been scheduled, and the administration has not detailed the specific terms it is seeking to renegotiate within USMCA. Trade groups tracking the review, including organizations representing distributors and manufacturers, are expected to weigh in as the negotiation process unfolds over the coming months. Until a revised agreement is reached, USMCA's existing terms remain operative, meaning current duty treatment for qualifying HVAC trade is unchanged for now — but subject to revisit at each future annual review rather than locked in for the long term originally contemplated when the agreement took effect in 2020.
