With mere days until trade officials embark on an official six-year review of the trilateral trade pact that connects Mexico, Canada and the United States through duty-free commerce, the industry is waiting with bated breath on an outcome that could have cascading impacts on the future of hemispheric cooperation.
Brokered by the term-one Trump administration, the U.S.-Mexico-Canada Agreement (USMCA) has fallen out of favor with American officials—most notably President Donald Trump. Icy tensions with trade partners that solidified in 2025 have thawed to a point, but key relationships—including that with the U.S.’s neighbor to the north—remain tepid at best.
Moreover, with the president keen on reanimating his now-defunct “reciprocal” tariff strategy through Section 301 investigations, the administration’s focus has been diverted. The desire to recoup tariff revenue and refill the Treasury’s coffers, now being depleted by refunds to importers, is a preeminent priority.
By contrast, Trump has rebranded USMCA—which he once called “the most important trade deal we’ve ever made”—to simply “irrelevant.”
There are many American producers who vehemently disagree.
“It’s foundational,” James McKinnon, CEO of Cotswold Industries, told Sourcing Journal of the agreement, which will undergo the review process by all parties beginning July 1.
“USMCA—and NAFTA before it—is the reason a Western Hemisphere textile supply chain exists at all,” he said. “For a components manufacturer…the agreement is the predictability that lets us invest.”
The New York-based firm, which manufactures pocketings, waistbands and other trims across its operations in Georgia and South Carolina, sees its products incorporated into garments assembled in Mexico. That clothing comes back into the American market and is sold to U.S. consumers.
Without that freedom of cross-border movement, the machinations of that well-oiled co-production chain will rust over, he believes. “Take away the certainty that compliant goods get duty-free treatment, and you’re not just raising a cost—you’re removing the floor we plan against. We make capital decisions on the assumption those rules hold.”
McKinnon believes there are misconceptions about the nature of the value chain. “People picture trade as a one-way street—we sell, they buy. Textiles aren’t that. It’s a loop, and every loop crosses the border a few times before a garment hits a shelf,” he added.
Mexico is Cotswolds’ primary export market—and that’s not an unusual reality for an American firm. According to McKinnon, most of his textile industry contemporaries count Mexico and Canada, collectively, as their biggest customers, amounting to more than half of what they ship to overseas markets.
“When people debate this agreement in the abstract, they forget it’s the backbone of where American-made textiles actually go,” he said. When asked about the possibility of a non-renewal for USMCA and what that could portend for the U.S. textile industry, McKinnon said “the real damage is uncertainty.”
Fashion firms and others that utilize American-made textile imports won’t commit to multi-year investments in the regional supply chain if they don’t know what the trade rules will look like a year from now. “I’m not just for renewal—I’m for a full-throated, durable renewal that strengthens the agreement: protect yarn-forward, close the exceptions that let third-country inputs sneak in, and get serious about customs enforcement. Renew it, strengthen it, and give this hemisphere the certainty to invest again,” he said.
Kim Glas, president and CEO of the Washington, D.C.-based National Council of Textile Organizations, agreed that certainty surrounding USMCA is pivotal to the industry’s success—its survival, even. According to the group’s most recent data, the American textile sector ships $11.6 billion, or 53 percent, of its total global textile exports to Mexico and Canada. Textile and apparel trade between the three nations amounted to $19.2 billion last year.
“If USMCA were not to be renewed or uncertainty associated with its future, I think that would chill business and have detrimental impacts on the U.S. textile industry,” she said.
Even with tariff turmoil swirling and adding a not-insignificant degree of confusion and instability to global trade, there have been some crucial bright spots for the textile industry over the past year, in large part because of the protections afforded by USMCA.
“We’re pleased the administration decided to protect qualified trade from USMCA; they have reiterated that in the Section 122 tariffs, they’ve reiterated that in the forced labor tariffs,” Glas said.
In other words, USMCA-qualifying goods like textiles and apparel have skirted the 10 percent global duties the Trump administration levied in February. And, should the Office of the U.S. Trade Representative move forward in imposing double-digit duties on trade partners subject to Section 301 investigations in July, those goods will also be exempt, shielded by their USMCA coverage.
However, Glas said, “We have the administration also saying major changes and reforms are necessary.” U.S. trade officials have hinted at the possibility of splitting the three-way pact into two bilateral trade agreements, likely because of the difficulties that have defined negotiations with Canada and the comparatively more advanced, collaborative discussions that have been had with Mexico.
With that possibility hanging in the air, Glas has concerns about future investment. “I think people who are purchasing or investing in USMCA may pause for a minute to try to understand what the administration is conveying” with such a proposal, she said.
And, she said, USMCA is not a perfect agreement in the eyes of NCTO—particularly when it comes to rules of origin and compliance.
“There are some provisions in the current USMCA that allow for third-party inputs, meaning you can source inputs from China and other countries who are non-parties to the agreement,” she said. “I think the time has come that those exceptions be revisited for items we absolutely make all day long. We shouldn’t be giving flexibility that undermines domestic production, so we’re asking USTR to look at that.”
NCTO provided public comments to the USTR late last year upon the trade agency’s request for input on USMCA from impacted parties and industries. While the group lobbied fiercely for the trade agreement’s renewal, Glas wrote at the time that exceptions to the yarn-forward rule of origin stipulated in the agreement, including tariff preference levels (TPLs) that permit duty-free treatment for products that contain components from countries outside the agreement, were a detriment to its efficacy.
“We also believe that the customs enforcement mechanism is significantly underutilized,” Glas said. “We know that there are unscrupulous actors who take advantage of that duty-free preference. Sadly, the governments between the U.S., Mexico, and Canada do not get together regularly to share information about enforcement. I think if we address some of the textile fraud, many [U.S.-based] facilities would be running at a 100 percent utilization rate—that’s how significant the problem is.”
While the outcome of next week’s negotiations will no doubt have a significant impact, Don Mabry, senior vice president of global trade solutions at digital supply chain management firm Infios, urged against catastrophizing.
“A non-renewal—it’s not going to collapse this agreement,” he said. If the U.S., Canada and Mexico cannot reach a consensus about renewal, a yearly review process will be triggered. Should Trump decide, in earnest, that he wants to pull the U.S. out of the agreement—which he hasn’t outright threatened, at least not seriously—the federal government would have to provide six months’ notice to trade partners. “We’re not looking at a cliff,” Mabry surmised.
That doesn’t mean there won’t be consequences to failing to reach consensus, however.
“There’s a lot of things going on out there—with all these tariff stackings and things that have made it more complicated to trade, and that’s definitely going to be compounded by this uncertainty,” he said.
Mabry pointed to recent Infios data which showed that Mexico and Canada saw sharp U.S. import spikes during May through June of 2025, with Mexico up 5.2 percent and Canada up 1 percent. Those rates stabilized to “roughly half those levels” later in the year—a phenomenon he said indicates frontloading that was followed by a desire to avoid risk.
While some gains were sustained throughout the second half of 2025, reflecting a “genuine nearshoring momentum,” there was a caveat. “Many USMCA‐qualified imports sit close to rules‐of‐origin thresholds, and with U.S. Customs and Border Protection (CBP) signaling increased audit activity, importers took a more conservative approach to qualification in the second half of the period, prioritizing compliance confidence over volume,” Infios reporting showed.
“They were testing routes,” Mabry said of U.S. importers, “not necessarily re-sourcing [in a way] that was durable.” In other words, they were treating USMCA as a “buffer” against Trump’s tariffs, but “not a guarantee” that they could source from the region effectively forever, given increased scrutiny from customs and shifting trade policies from the U.S. administration.
If USMCA’s rules of origin are revised and potentially tightened to exclude foreign inputs, that could add another layer of complexity for importers and customs brokers managing tariff workflows they don’t yet have the capabilities to handle, he believes.
Apparel, textiles and footwear are particularly “exposed” to risk, Mabry said, “because they are often combining all these different components from different countries.” Companies need to have an airtight hold on their own sourcing data—an understanding not only of where the materials and inputs are coming from, but how to substantiate their claims and classify customs entries with precision.
“CBP is applying a lot of AI and data analytics against the volume of trade data, because that’s how they’re able to identify who would they like to potentially audit, and they’re getting more sophisticated around that,” Mabry said.
Between heightened enforcement from CBP and a potential shift in rules of origin under USMCA, importers have some work to do when it comes to ensuring compliance, he believes—and there may be an appetite on the part of the government to make those changes.
But he doesn’t believe an exit from the agreement, or a total redefining of its terms, is imminent.
“I don’t know that they’re going to lean into this and do something super forceful around it, whether it’s exiting or pushing it to a point of decision; instead I think they’re going to be more collaborative on the negotiations behind scenes,” he said of the trade negotiators. “We’ll see, though, because it seems like it’s just one big chess match.”
